County of Dakota v. Milan

Citation:
County of Dakota v. Milan (In re Milan), Case No. 16-6012 (8th Cir. B.A.P. September 22, 2016)
Tag(s):
Ruling:
Section 523(a)(7) does not require a court order to impose a debt with the characteristics of a fine or penalty; however, the debt cannot be imposed as compensation for actual pecuniary loss. Minnesota's "pay to stay" statute does not create a traditional debtor-creditor relationship and the clear intent of the statute is pecuniary in nature. Upon de novo review, the B.A.P. found that the bankruptcy court did not err in determining that the incarceration cost debt was subject to discharge under section 523(a)(7).
Procedural context:
On appeal from the United States Bankruptcy Court for the District of Minnesota - St. Paul determining that state law "pay to stay" costs are dischargeable in chapter 7.
Facts:
Pre-petition debtor was incarcerated in the Dakota County Jail for a period of time resulting in over $3,500 of costs based upon a fixed rate for criminally convicted inmates expressly authorized under Minnesota law. In debtor's chapter 7 schedules, he listed these costs as a non-priority unsecured debt. Dakota County filed an adversary proceeding seeking to have the debt excepted from discharge under 11 U.S.C. section 523(a)(7) as a fine, penalty or forfeiture payable to a governmental unit and not pecuniary in nature.
Judge(s):
Schermer, Nail and Shodeen

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