As a young child I can remember enjoying some quiet time reading books at our county’s public library. I wouldn’t have considered myself a “bibliophile” (a person who loves and frequently reads books), but nonetheless I found our county library a relaxing place to study and read.
Every once in a while I would be told that I owed a small fine for returning a book late. In those days, my average library fine balance was less than $2.00. Fortunately, I never had to deal with damaged or lost books, which would likely cost me more.
These days, I am the managing attorney at a Toledo based bankruptcy law firm. Recently, someone asked me if they could wipe out a debt owed to the County Public Library for fines and lost or damaged items. As I learned more about the person’s situation, I quickly discovered that this was not one of those $2.00 situations. This person owed nearly $500.00 to the County Public LIbrary and no longer has the borrowed items. The goal was to file a chapter 7 bankruptcy and include these library debts with other medical debts so as to get a fresh start.
BANKRUPTCY LAW AND LIBRARY FINES:
At first look, the bankruptcy laws seem clear about library fines being a non-dischargeable debt. In other words, the library fines would not be discharged in a chapter 7 bankruptcy and this debt would remain after one’s chapter 7 bankruptcy is concluded. But the law is rarely that simple, so let’s take a closer look at library fines and bankruptcy.
Basic Rule: Section 523(a)(7) of the U.S. Bankruptcy Code provides that fines, among other things, payable to and for the benefit of a governmental unit which is not compensation for actual loss are not dischargeable.
A Closer Look: Most public library districts are considered a governmental unit. So if you owe a simple fine for not returning your books on time (let’s say $20.00), this fine is not dischargeable. Seems simple, right? But what if you completely destroyed a handful of video games borrowed from the public library? Section 523(a)(7) contains a few more words that may be important to you. A closer look at Section 523(a)(7) reveals a difference between fines and compensation for actual loss owed to a governmental unit.
Example: Remember our debtor who owes the County Public Library $500.00. Is this amount for fines, compensation for loss, or a mix of both? In this particular case, there is a mix of both as the $500.00 balance contains $300.00 of straight fines and $200.00 for the cost of replacing the damaged video games. Thus, the debtor can include $200.00 of his library debts within his chapter 7 bankruptcy. Meanwhile, the remaining $300.00 for fines will survive the chapter 7 bankruptcy. This particular debtor intends to repay the $300.00 by making a modest payment plan with the library. A win/win scenario, worth taking the extra time.