472 B.R. 748
Bankr. E.D. Mich.2012Background
- Consolidated adversary proceedings to determine if debts from a Michigan Attorney Discipline Board order are nondischargeable under §523(a)(7).
- Stasson was ordered to pay restitution to Basquin ($29,178.88) and costs ($4,477.56) by the Board’s March 20, 2009 order; payment due dates were in 2009.
- Stasson filed Chapter 7; she received a discharge on August 30, 2011.
- Plaintiffs sought §523(a)(7) nondischargeability; the court addressed only §523(a)(7) issues, not §523(a)(4).
- Materials show Stasson never paid either restitution or costs as ordered.
- Court will deny Commission’s motion for summary judgment and grant Stasson’s motion for summary judgment on the §523(a)(7) issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §523(a)(7) apply to the restitution debt to Basquin? | Restitution is payable to a governmental unit and for the benefit of the public. | Restitution is payable to an individual, not a governmental unit, and compensates actual pecuniary loss. | No; restitution not nondischargeable under §523(a)(7). |
| Does §523(a)(7) apply to the costs debt to the State Bar of Michigan? | Costs are payable to and for the benefit of a governmental unit and may be nondischargeable. | Costs constitute compensation for pecuniary loss and are dischargeable. | No; costs are compensation for pecuniary loss and not nondischargeable under §523(a)(7). |
| Are §523(a)(7) exceptions to discharge strictly construed against the creditor? | Strict construction favors nondischargeability of disciplinary costs. | Strict construction against creditor applies; limits nondischargeability. | Court applies strict construction against creditor in §523(a)(7) context (re costs and restitution). |
| What is the court's overall ruling on the motions? | Commission seeks summary judgment that both debts are nondischargeable. | Stasson seeks summary judgment that neither debt is nondischargeable. | Court denies Commission’s motion and grants Stasson’s motion; neither debt is nondischargeable under §523(a)(7). |
Key Cases Cited
- Hughes v. Sanders, 469 F.3d 475 (6th Cir.2006) (restitution to client not §523(a)(7) nondischargeable when not payable to governmental unit)
- Kelly v. Robinson, 479 U.S. 36 (1987) (criminal restitution to state agency may be nondischargeable; narrowly limited to governmental restitution)
- Rembert v. AT&T Universal Card Servs., Inc. (In re Rembert), 141 F.3d 277 (6th Cir.1998) (strict construction of §523(a) exemptions against creditor)
- Love v. Scott (In re Love), 442 B.R. 868 (Bankr.M.D.Tenn.2011) (costs in attorney disciplinary proceedings may be treated as pecuniary loss)
- Doerr (In re Doerr), 185 B.R. 533 (Bankr.W.D.Mich.1995) (discusses whether disciplinary costs are pecuniary loss or fines)
- Hughes v. Sanders, 469 F.3d 475 (6th Cir.2006) (discussed above (duplicate entry for emphasis))
- Ward (Manufacturer’s Hanover Trust v. Ward), 857 F.2d 1082 (6th Cir.1988) (context on strict construction of discharge exceptions)