Asset Forfeiture and Bankruptcy

Bankruptcy Can’t Stop Criminal Asset Forfeiture

If you are facing asset forfeiture for a criminal act you have committed, don’t look to bankruptcy to take care of your problems.  Under the well-established relation-back doctrine, the Government’s interest in property vests at the time of the offense giving rise to the forfeiture, and the property subject to forfeiture is not eligible to become property of the estate, and therefor not afforded the protection of the automatic stay.

Although the automatic stay provided in bankruptcy can eliminate one’s obligation on a host of financial responsibilities, any asset forfeiture related to a criminal case is not affected by filing.  11 U.S.C. 362(a)(1) says that the automatic stay does not affect “the commencement or continuation of a criminal action or proceeding against the debtor.”  Further, because criminal asset forfeitures are brought by the government, the automatic stay also is inapplicable to them.  A stay does not affect “the commencement or continuation of an action or proceeding by a governmental unit… to enforce such governmental unit’s… police and regulatory power.”  11 U.S.C. 362(b)(4).

In a criminal asset forfeiture case, the government’s interest in forfeitable property vests at the time of the offense that gave rise to the forfeiture, and the property subject to forfeiture is not estate property subject to the automatic stay.  “All right, title, and interest in [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][forfeitable] property… vests in the United States upon the commission of the act giving rise to forfeiture under this section.”  United States v. United States Currency, 895 F. 2d 908, 916 (2d Cir. 1990)  Because “the forfeiture occurs when the crime is committed,” a defendant has no interest in forfeited property “as of that moment.”  Therefore, the automatic stay does not affect criminal forfeiture proceedings, which may continue unabated during the bankruptcy proceedings.

Unfortunately, one of the tools state and federal legislatures are adopting is to create civil penalties for criminal behavior.  One civil penalty used frequently in the war on drugs has become the Civil Asset Forfeiture which is commonly used to seize private property that has been used to facilitate violations of various drug laws.

The inability of bankruptcy, a right provided for Americans through the Constitution, to protect property and assets from seizure when it has been involved in a drug forfeiture case, is one of many harsh outcomes of America’s over-enthusiastic war on drugs.

Even though bankruptcy cannot protect property seized in this way, it can help you eliminate other debt and to stop garnishments.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]