You’re busted, heading to jail for a one-time mistake, say, petty fraud or drunk driving. You’re small, frail, haven’t used your fists since the fifth grade and are about to meet some seriously hard-core dudes at county jail. Don’t worry there are what is called pay-to-stay jails. The Beverly Hills Police Department has one. The program offers individuals an alternative to serving time in a county jail facility. A jail sentence can be served in the safe, clean, and secure environment of the Beverly Hills Police Department’s Jail facility (honestly that is how the BHPD advertises it). It costs $110.00 per day. City of Glendale has a similar program, that costs $90.00 per day. Location, Location, Location.
Desperately wanting to avoid county jail, You might have decided to rack up some debt indulging your stay at the above five star pay-to-stay jails. Can you discharge them in bankruptcy? Well, with the right bankruptcy attorney at your side you may be able to discharge the debt. No folks, I am not making this up. Its one of these weird but true stories that have actually happened.
Jacob Jerome and Ashley Kaye Milan filed chapter 7 bankruptcy in which they listed, as an unsecured, non-priority debt, $3,600.00 owed to Dakota County incurred by Mr. Milan under the state pay-to-stay program for prison inmates. Unlike court costs and fees which are administered by the district court collector, the pay-to-stay program is administered by the Dakota County Sheriff’s Office.
The county filed an adversary complaint seeking declaratory judgment that the debt was not dischargeable and the parties filed cross-motions for summary judgment.
Section 523(a)(7) renders nondischargeable a debt that is: 1) a “fine, penalty, or forfeiture,” 2) payable to a governmental unit, and 3) “not compensation for actual pecuniary loss.” The controversy in this case revolved around the first and third prongs of this test. In this case, the court reasoned that the debt did not arise out of a court order, however, but out of a program established by the state and administered by the DCSO. The court, therefore, turned to the three-part test to determine whether the debt was nonetheless nondischargeable.
The court rejected DCSO’s argument that the costs are “penal” because they are a result of Mr. Milan’s criminal conviction and incarceration. The court found no connection by statute or otherwise between the cost recoupment program and the criminal justice system that would justify calling the costs a “penalty.” Nor could it be deemed penal as having been included in a court order or as part of the criminal process. As such, it did not meet the first requirement of the exception to discharge test set forth in section 523(a)(7).
The Milan court found no similar penal purpose behind the pay-to-stay program. The program was codified in the state’s civil administrative code rather than its criminal code. Its stated purpose was to help the county recoup some of the costs of incarceration and it was directly related to the county’s actual costs. Moreover, in the event that a pay-to-stay debtor fails to pay the costs, the statute provides for ordinary civil collection methods to be used rather than recourse to the criminal justice system.
The court dismissed found in favor of the debtor and granted summary judgment. This case is currently on appeal to the BAP for the Eighth Circuit, No. 16-6012.
One final note here is that most local pay-to-stay programs require payment upfront. So probably you will need to borrow the money to pay them. But still you should be able to discharge the debt that you borrowed for that purpose. You just need to have the best bankruptcy attorney who will find these legal jewels and get you out of jail.
So next time you get in trouble with Glendale Police Department, whether you are rich or poor, you might consider the five star treatments, MasterCard may help with that. For everything else, there’s Bankruptcy.