U.S. v. Colasuonno
- Summarized by Gaston Loomis , McElroy, Deutsch, Mulvaney & Carpenter LLP
- 12 years 3 months ago
- Citation:
- U.S. v. Colasuonno, Case No. 11-1188 (2nd Cir. Oct. 12, 2012)
- Tag(s):
-
- Ruling:
- Section 362(b)(1) of the Code excepts from the stay "the commencement or a continuation of a criminal action or proceeding against the debtor." In a matter of first impression for this court, the Second Circuit found that (i) a condition of criminal sentencing and (ii) any proceeding that addresses a violation of this condition of criminal sentencing falls within the scope of Section 362(b)(1). As a result, the Section 362(a) automatic stay did not protect the Debtor from having to pay restitution payments to the IRS while in bankruptcy (i.e. a condition of his probation) nor did it protect the Debtor from the resulting proceeding and judgment of the S.D.N.Y. which resulted from his failure to makes these restitution payments (i.e. the proceeding addressing a violation of the terms of his probation).
- Procedural context:
- Appeal from a decision of the S.D.N.Y. resentencing the Debtor to incarceration after failing to pay court-ordered restitution. The S.D.N.Y. based this decision on the Debtor's willful violation of the terms of his probation, namely his obligation to pay restitution payments to the IRS. In his appeal to the Second Circuit, the Debtor argued that Section 362(a) stayed his obligation to pay restitution while in bankruptcy and precluded the S.D.N.Y. from entering a judgment against him based on his failure to pay.
- Facts:
- Prior to filing bankruptcy, the Debtor pleaded guilty to charges of bank fraud and tax crimes. He was given probation and ordered as a condition of this probation to pay restitution to the IRS. The Debtor made a half-hearted attempt to make restitution payments to the IRS and eventually filed bankruptcy. After the petition date, the Debtor argued that the Section 362(a) automatic stay relieved him of any obligation to pay restitution payments to the IRS while in bankruptcy. The S.D.N.Y. soon learned of the Debtor's behavior and particularly focused on his most recent attempt to evade his obligation to the IRS by filing bankruptcy. After rejecting the Debtor's argument that the stay protected him from his restitution obligation, the S.D.N.Y. found that the Debtor had willfully violated the terms of his probation and so revoked his probation and sentenced him to jail.
- Judge(s):
- Kearse, Walker, and Raggi, Circuit Judges
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