Summary:
Dedre Feyijinmi was found guilty of welfare fraud and ordered to pay $14,487 in restitution. The state court deferred the entry of her conviction, placing her on probation. After completing her probation, her criminal records were expunged but her restitution obligation remained. Ms. Feyijinmi filed for Chapter 13 bankruptcy, and Maryland filed a proof of claim for the restitution debt, inaccurately labeling it as "court fees." Ms. Feyijinmi brought an Adversary Proceeding seeking a determination that this debt was discharged, but that was rejected by the bankruptcy and district courts.
On appeal, the Fourth Circuit began its analysis with the interpretation of the term "conviction" under 11 U.S.C. § 1328(a)(3), relying on the Supreme Court's decision in Dickerson v. New Banner Institute, Inc., which held that a guilty plea followed by probation qualifies as a conviction, even when no formal judgment is entered. The court determined that Feyijinmi's probation before judgment, which required a guilty finding, constituted a conviction under federal law. The court concluded that "sentence" , as used in § 1328(a)(3), includes any penal consequences resulting from a determination of guilt, such as probation and restitution.
Finally, the court rejected Ms. Feyijinmi's argument that the mischaracterization of the debt as "court fees" on the proof of claim affected its dischargeability. As restitution debts are nondischargeable without any action by the creditor and that the proof of claim and any characterization of the debt did not change its nature. The court also found no evidence of bad faith or unreasonable delay that could have prejudiced Feyijinmi.
Commentary:
In regards to the characterization by Maryland in its Proof of Claim, it should be noted that the Court of Appeals held "that to the extent that the proof of claim was ambiguous, it was cleared up by the attached restitution order" (Emphasis added) and a restitution order is nondischargeable without any action by the creditor. While this would likely mean that an adequately documented Proof of Claim that failed to accurately characterize a debt as child support would remain a priority, nondischargeable claim, but that a secured creditor that included no evidence of a lien and affirmatively stated that it held an unsecured claim might not find the same protection.
See also: Rochelle's Daily Wire- Fourth Circuit Broadly Defines Restitutions that Aren’t Discharged in Chapter 13
NACBA filed an amicus brief in support of the Debtor/Appellant- In re Feyijinmi - NACBAs Amicus Brief In Support of Appellant
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