Jason Troff was convicted in 1997 of setting fire to a McDonald's in Salt Lake City. The court sentenced him to probation and $239,696 in restitution. As a term of his probation, he began paying installments of $100 a month to the state, which disbursed that money to the owner of the McDonald's. At the end of his probation, the court instructed him to make payments directly to the victim.
Troff eventually paid off about $8,000. But in 2003, he filed for bankruptcy and asked the court to excuse the rest of his debt. The Utah bankruptcy court let Troff off the hook for the remaining $232,000.
Although judgments owed to private parties are normally dischargeable under Chapter 7, Utah appealed the decision, arguing Troff's debt fell under an exception in the bankruptcy code, which prohibits a debtor from getting out of "a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit." Utah argued that although the restitution was being paid to a private crime victim, it benefited the state because it was part of a criminal sentence, and the state had a strong interest in seeing its criminal judgments upheld. The district court agreed. On March 15, the 10th Circuit affirmed the district court ruling.
"When imposed as part of a criminal sentence, restitution ensures that offenders pay their debt, not only to their victims, but also to society," the court wrote. "Permitting offenders to discharge their court-imposed obligations ... would subvert Utah's sentencing scheme."