Bankruptcy

Discharge Of Attorney Fees Awarded As Discovery Sanction In Civil Lawsuit

By Jonathan Alper

A caller and prospective bankruptcy debtor asked if attorneys fees awarded in a civil proceeding as a discovery sanction could be discharged in a Chapter 7 bankruptcy. The caller was concerned that "sanctions" imposed by a civil state court are in the nature of a "fine" or "penalty" for violation of court discovery orders. Section 523 of the bankruptcy code lists all types of debts which are non-dischargeable. All debts not listed in that Code section are dischargeable. Attorney fee sanctions in civil proceedings are not among the listed non-dischargeable debts.

Section 523 does include fines and penalties among non-dischargeable debts, but it specifically is limited to those fines and penalties payable to a governmental unit. Discovery sanctions in civil lawsuits are payable to the opposing party and not to the court or any unity of state or local government. There is nothing in Code section that describes civil sanctions awarded as part of civil judgment pursuant to a statute or contract. There are some exceptions where civil attorney fee awards will survive bankruptcy. At least one Florida bankruptcy court held that attorney fees awarded in a divorce case cannot be discharged if the proceeding is related to support or alimony. Also, fee sanctions awarded in the bankruptcy proceeding itself must be paid by the debtor. However, the general answer to the question is, I believe, that attorney fee sanctions and judgments for attorney fees in civil lawsuit can be discharged.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Full post as published by Florida Bankruptcy Law on December 08, 2008 (boomark / email).