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TJ, Esq.
TJ, Esq., Attorney
Category: Bankruptcy Law
Satisfied Customers: 11648
Experience:  JD, MBA
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Workers Comp fine -should I file banruptcy

Resolved Question:

I am potentially looking at a fine of upwards of $50K due to a failure of one of my subcontractors to have Worker's Comp. I received a stop work order and have submitted all the necessary paperwork to have it lifted. If the fine is levied, I have no assets to pay it at this time. My company is a carpentry company that has been greatly affected by the housing downturn. I am a sub chapter S. If I file bankruptcy, will that eliminate the fine and what impact will that have on my personal finances.
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  TJ, Esq. replied 8 years ago.
Hello and thank you for allowing me to address your legal question.

Since your company is a corporation, its bankruptcy should not directly affect your personal finances at all. And I assume your company would be fined rather than you personally. Can you provide a little more information on the fine? Who is assessing the fine? I want to be sure it will be wiped out if the company files for bankruptcy protection. My instinct is that the fine would be eliminated, but I’m not 100% sure. I’d have to research it a bit.

Thank you.
Customer: replied 8 years ago.
the fine is being levied by the Fl State Workers Compensation's been over a week since we submitted all the paperwork to the State for review. We are still shut down, can not do work in FL until they determine/levy a fine..
Expert:  TJ, Esq. replied 8 years ago.

Hi again. Thank you for returning with the requested information. I researched the Bankruptcy Code and I believe that if the fine is assessed on your corporation rather than on you personally, then the fine will be discharged in bankruptcy. If the fine were imposed on you personally, then it will not be discharged in bankruptcy. Reference the following law:

§ 523. Exceptions to discharge

(a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt

(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty—

As you can see, a fine imposed by a governmental unit on an individual cannot be discharged. Congress was specific in that it does not apply to businesses (and how could it…if a company went completely out of business, how could it ever pay the fine?). Therefore, assuming the fine is assessed strictly on your company, it can file for bankruptcy protection and the fine will be discharged. Barring very unusual circumstances of fraud or misrepresentations, or in cases where you personally guaranteed a debt, the company’s bankruptcy should not directly affect your personal finances or your credit report.

If the information that I provided was helpful, please remember to ACCEPT my post as that is the only way I will receive credit and compensation for my answer. Thank you and good luck!

DISCLAIMER: Please understand that the complexities of most legal problems cannot be sufficiently addressed in this setting. Accordingly, my post is intended as general information only, and should neither be construed as specific legal advice, nor as an adequate substitute for the retention of legal counsel.

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