Lead Opinion
delivered the opinion of the Court.
In Kelly v. Robinson,
I
In September 1986, respondents Edward and Debora Davenport pleaded guilty in a Pennsylvania court to welfare
In May 1987, the Davenports filed a petition under Chapter 13 in the United States Bankruptcy Court for the Eastern District of Pennsylvania. In their Chapter 13 statement, they listed their restitution obligation as an unsecured debt payable to the Department of Public Welfare. Soon thereafter, the Adult Probation and Parole Department of Bucks County (Probation Department) commenced a probation violation proceeding, alleging that the Davenports had failed to comply with the restitution order. The Davenports informed the Probation Department of the pending bankruptcy proceedings and requested that the Department withdraw the probation violation charges until the bankruptcy issues were settled. The Probation Department refused, and the Davenports filed an adversary action in Bankruptcy Court seeking both a declaration that the restitution obligation was a dischargeable debt and an injunction preventing the Probation Department from undertaking any further efforts to collect on the obligation.
While the adversary action was pending, the Bankruptcy Court confirmed the Davenports’ Chapter 13 plan without objection from any creditor.
The Bankruptcy Court subsequently held that the Davenports’ restitution obligation was an unsecured debt dis-chargeable under 11 U. S. C. § 1328(a).
To address a conflict among Bankruptcy Courts on this issue,
II
Our construction of the term “debt” is guided by the fundamental canon that statutory interpretation begins with the
Petitioners maintain that a restitution order is not a “right to payment” because neither the Probation Department nor the victim stands in a traditional creditor-debtor relationship with the criminal offender. In support of this position, petitioners refer to Kelly’s discussion of the special purposes of punishment and rehabilitation underlying the imposition of restitution obligations.
In Kelly, the Court decided that restitution orders fall within 11 U. S. C. § 523(a)(7)’s exception to discharge provision, which protects from discharge any debt “to the extent
Contrary to petitioners’ argument, however, the Court’s prior characterization of the purposes underlying restitution orders does not bear on our construction of the phrase “right to payment” in § 101(4)(A). The Court in Kelly analyzed the purposes of restitution in construing the qualifying clauses of § 523(a)(7), which explicitly tie the application of that provision to the purpose of the compensation required. But the language employed to define “claim” in § 101(4)(A) makes no reference to purpose. The plain meaning of a “right to payment” is nothing more nor less than an enforceable obligation, regardless of the objectives the State seeks to serve in imposing the obligation.
Nor does the State’s method of enforcing restitution obligations suggest that such obligations are not “claims.” Although neither the Probation Department nor the victim can enforce restitution obligations in civil proceedings, Commonwealth v. Mourar,
Ill
Moving beyond the language of § 101, the United States, appearing as amicus in support of petitioners, contends that other provisions in the Code, particularly the exemption to the automatic stay provision, § 362(b)(1), and Chapter 7’s distribution of claims provision, § 726, reflect Congress’ intent to exempt restitution orders from discharge under Chapter 13. We are not persuaded, however, that the language or the structure of the Code as a whole supports that conclusion.
Section 362(a) automatically stays a wide array of collection and enforcement proceedings against the debtor and his property.
We find no inconsistency in these provisions. Section 362(b)(1) ensures that the automatic stay provision is not construed to bar federal or state prosecution of alleged criminal
The United States’ reliance on § 726 is likewise unavailing. That section establishes the order in which claims are settled under Chapter 7. Section 726(a)(4) assigns a low priority to “any allowed claim, whether secured or unsecured, for any fine, penalty, or forfeiture ... to the extent that such fine, penalty, forfeiture, or damages are not compensation for actual pecuniary loss suffered by the holder of such claim.” The United States argues that the phrase “fine, penalty, or forfeiture” should be construed to apply only to civil fines, penalties, and forfeitures, and not to criminal restitution obligations. Otherwise, State and Federal Governments will receive disfavored treatment relative to other creditors both in Chapter 7 and Chapter 13 proceedings, see § 1325(a)(4) (a Chapter 13 plan must ensure that unsecured creditors receive no worse treatment than they would under Chapter 7), a result the United States regards as anomalous given the strength of the governmental interest in collecting restitution payments.
The central difficulty with the United States’ construction of § 726(a)(4) is that it conflicts with Kelly’s holding that § 523(a)(7), the exception to discharge provision, applies to criminal restitution obligations.
The United States’ position here highlights the tension between Kelly’s, interpretation of § 523(a)(7) and its dictum suggesting that restitution obligations are not “debts.” See supra, at 557. As stated above, Kelly found explicitly that § 523(a)(7) “codifies the judicially created exception to discharge” for both civil and criminal fines.
Moreover, in locating Congress’ policy choice regarding the dischargeability of restitution orders in § 523(a)(7), Kelly is faithful to the language and structure of the Code: Congress defined “debt” broadly and took care to except particular debts from discharge where policy considerations so war
IV
Our refusal to carve out a broad judicial exception to discharge for restitution orders does not signal a retreat from the principles applied in Kelly. We will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure. Kelly, supra, at 47 (citing Midlantic National Bank v. New Jersey Dept. of Environmental Protection,
Nor do we conclude lightly that Congress intended to interfere with States’ administration of their criminal justice systems. Younger v. Harris,
V
Restitution obligations constitute debts within the meaning of § 101(11) of the Bankruptcy Code and are therefore dis-chargeable under Chapter 13. The decision of the Court of Appeals is affirmed.
It is so ordered.
Notes
The Davenports subsequently fulfilled their obligations under the plan and received a discharge pursuant to 11 U. S. C. § 1328(a), which provides: “As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge
Compare, e. g., In re Kohr,
Although the automatic stay protects a debtor from various collection efforts over a specified period, it does not extinguish or discharge any debt. See generally 1 W. Norton, Bankruptcy Law and Practice §§20.04-20.36 (1986 and Supp. 1989).
In any event, the Government’s contention that Congress must have intended to favor criminal, as opposed to civil, claims held by the government is unsubstantiated. The United States’ view about the wisdom of this policy choice, unsupported by any textual authority that Congress in fact adopted such a policy, is an inadequate basis for rejecting the statute’s broad definition of “debt.” See supra, at 557-558.
Dissenting Opinion
with whom Justice O’Connor joins, dissenting.
The Court today concludes that Congress intended an obligation to pay restitution imposed as part of a state criminal sentence to be a “debt” within the meaning of the United States Bankruptcy Code. Because Congress has given no clear indication that it intended to abrogate the long “history of bankruptcy court deference to criminal judgments,” Kelly v. Robinson,
The majority appropriately begins its analysis with the language of the statute. As the majority points out, the Bankruptcy Code defines “debt” as a “liability on a claim.” 11 U. S. C. § 101 (11). The term “claim,” in turn, is defined as a “right to payment.” § 101(4)(A). The question then becomes whether it is clear from the statutory language alone that a restitution order is a “right to payment,” or whether the statutory language, “at least to some degree, [is] open to interpretation.” Ron Pair,
Some time ago, Justice Frankfurter pointed out: “The notion that because the words of a statute are plain, its meaning is also plain, is merely pernicious oversimplification.” United States v. Monia,
My conclusion that the majority errs in concluding that the words “right to payment” include restitution orders is supported by the fact that such an interpretation would produce a result “‘demonstrably at odds with the intention of its drafters.’” Ron Pair,
Because Congress’ presumed intent is to preserve preCode piactice unless it specifically indicates otherwise, we must first consider the treatment of criminal restitution orders under the 1898 Act. That Act established two categories of debts, those that were “allowable” and those that were “provable.” “Only if a debt was allowable could the creditor receive a share of the bankrupt’s assets.” Ibid., citing § 65a. Only provable debts were-dischargeable. See §17. The Court in Kelly explained that penalties or forfeitures owed to governmental entities generally were not allowable, §57j; but the Act failed to state that such debts were not provable. See § 63. Given this statutory scheme, “[t]he most natural construction of the Act, therefore, would have allowed criminal penalties to be discharged in bankruptcy, even though the government was not entitled to a share of the bankrupt’s estate.”
Thus, under the 1898 Act, criminal monetary sanctions were not allowable, provable, or dischargeable in bankruptcy. In functional terms, criminal monetary sanctions were not “debts” for the purpose of pre-Code bankruptcy proceedings. This judicially created pre-Code practice “reflected policy considerations of great longevity and importance,” that is, “‘a deep conviction that federal bankruptcy courts should not invalidate the results of state criminal proceedings.’” Ron Pair,
In the face of such a longstanding principle, “a court must determine whether Congress has expressed an intent to change the interpretation of a judicially created concept in enacting the Code.” Ibid. The Court stated in Midiantic: “The normal rule of statutory construction is that if Congress intends for legislation to change the interpretation of a judicially created concept, it makes that intent specific.”
The majority today brushes aside the rule of statutory construction outlined by this Court — a rule the Court has stressed must be used with “particular care in construing the scope of bankruptcy codifications.” Midlantic,
“[U]nder the liquidation chapters of the Bankruptcy Act, certain creditors are not permitted to share in the estate because of the non-provable nature of their claims, and the debtor is not discharged from those claims. Thus, relief for the debtor is incomplete, and those creditors are not given an opportunity to collect in the case on their claims. The proposed law will permit complete settlement of the affairs of a bankrupt debtor, and a complete discharge and fresh start.” H. R. Rep. No. 95-595, supra, at 180 (footnote omitted).
The statutory language itself highlights this approach. The Code’s definition of “claim” includes any right to payment that is “unliquidated,” “contingent,” “unmatured,” or “disputed,” 11 U. S. C. §101(4)(A), but does not include any modifier that in any way suggests the incorporation of criminal sanctions.
The majority’s assertion that Congress’ enactment of § 523 (a)(7) evidences a “clear indication” to abrogate pre-Code rulings that criminal sanctions were neither provable nor dis-chargeable in bankruptcy is similarly unconvincing. Under § 523(a)(7), a debt is not dischargeable “to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty.” § 523(a)(7). The majority reasons that if restitution obligations were not debts, there would be no need to except them from discharge; therefore, it says, Congress clearly intended that criminal restitution orders be considered debts. Because § 523(a)(7) does not apply to all Chapter 13 proceedings, the majority contends that criminal restitution obligations should be con
In addition, pre-Code Chapter XIII essentially adopted Chapter VII discharge policy, excepting from discharge all debts that were not dischargeable under Chapter VII when those debts were held by creditors who had not accepted the bankruptcy plan. See § 60 of the Act. Congress’ failure to include a parallel provision to § 523(a)(7) in Chapter 13, far from demonstrating a clear intent to make fines discharge-able in Chapter 13, is more likely a carryover from pre-Code practice, where Chapter XIII relied on Chapter VII’s discharge provisions. “If Congress had intended, by § 523(a)(7) or by any other provision,” to change the pre-Code practice of holding monetary sanctions not allowable, provable, or dis-chargeable in bankruptcy, “‘we can be certain that there would have been hearings, testimony, and debate concerning consequences so wasteful, so inimical to purposes previously deemed important, and so likely to arouse public outrage.’” Kelly,
I do not believe that Congress so cavalierly would have disregarded the States’ overwhelmingly important interest in administering their criminal justice systems free from the interference of a federal bankruptcy judge. Every State and the District of Columbia presently authorize the use of restitution orders. See Note, Criminal Restitution as a Limited
The majority’s decision today will have an adverse effect on the sentencing process. The judgment of sentencing courts and legislators that rehabilitation is the most effective form of punishment will be tempered by the knowledge that convicted criminals easily may avoid a sentence requiring restitution merely by obtaining a Chapter 13 discharge. Sentencing courts will be faced with a dilemma. The sentencing judge must either risk that a federal bankruptcy judge will undermine a restitution order, thus absolving the convicted criminal from punishment, or impose a harsher and less appropriate term of imprisonment, a sentence that the federal bankruptcy court will be unable to undermine. Congress surely would not have enacted legislation with such an extraordinary result without at least some discussion of its consequences.
The majority’s holding turns Kelly around. The Kelly Court stressed this compelling federalism concern, terming it “one of the most powerful of the considerations that should influence a court considering equitable types of relief,” and recognized that it “must influence our interpretation of the Bankruptcy Code.”
I dissent.