Are Bail Bonds Wiped Out During Chapter 7 Bankruptcy?

Finance & Money Blog

It's an all-too-familiar story. Someone gives money or collateral to a bail bondsman to get a friend or family member out of jail, but the defendant skips town and leaves the person stuck paying the entire forfeited bail amount to the bondsman. This can represent a significant financial burden, depending on the bond amount, and some people may consider filing for bankruptcy to eliminate it. Whether you can escape this obligation by filing bankruptcy, however, depends on the type of bail bond obtained.

Cash Bond

A chapter 7 bankruptcy will typically wipe out a bond that was only secured by a personal guarantee. Essentially, the bail company agreed to put up the money for the bond without requiring you to secure it with any collateral. This is typically called a cash or surety bond, and the bankruptcy court will treat this obligation like unsecured debt.

Creditors to whom you owe unsecured debt are usually paid last from any money that was leftover from paying creditors with secured or priority debt. The bail bond company may get some money or it may not, depending on the amount of cash and assets available in your bankruptcy estate. Regardless, any balance left owing is usually discharged, and you won't be liable for paying the company after your case ends.

The only exception to this is if the debt was incurred in the 70 to 90 days prior to filing bankruptcy. The bondsman could successfully argue you agreed to the bond knowing you would file bankruptcy soon after. This is seen as fraud, and the court may not allow the debt to be discharged if the bail company can prove its case.

Collateral-Based Bonds

The situation is a little different if you secured the debt using collateral, such as your home. Typically, the bail bond company will put a lien on the property for the duration of the time you owe the debt. The trustee will attempt to pay the bail debt, but any balance leftover will be discharged. However, the lien on the property will not be released.

While bankruptcy prevents the bail company from using most collection methods to get you to pay the money you owe it, the law still lets it seize the property securing the debt. Additionally, liens remain with the property even if you transfer it to another person. In the case of real estate, this means you'll usually have to pay the lien off first to get it removed before any potential buyer will take possession of the home or property.

If you're struggling to pay off a bond debt, there may be other options available besides filing for bankruptcy. Talk with the bail bond company to discuss alternative ways to handle the debt that may save your collateral and your credit. Contact Bail Bond BY Affordable Bonding or a similar location for more info.


11 May 2016

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