Bankruptcy Law

Lawyer can't erase costs of disciplinary proceedings in bankruptcy, 7th Circuit rules

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A Wisconsin lawyer can’t use bankruptcy to avoid an order to pay the costs of an ethics proceeding against him, a federal appeals court ruled Monday.

The 7th U.S. Circuit Court of Appeals at Chicago said the order to pay $12,500 was a penalty by a governmental body that can’t be discharged in bankruptcy.

Law360, Bloomberg Law and covered the Feb. 7 opinion.

Three other federal appeals courts that have considered the issue have come to the same conclusion, the 7th Circuit said.

The lawyer, Tim Osicka of Wisconsin, had received a reprimand in the ethics case, along with an order to pay $150 in restitution and $12,500 in costs. He had been accused of failing to respond to client grievances and failing to cooperate in an investigation of his work for those clients. His license was suspended when he failed to pay costs.

Osicka received a general discharge of debts after he closed his law practice and filed for bankruptcy in 2011. But the Wisconsin Office of Lawyer Regulation later refused to lift the suspension until Osicka paid the costs. Osicka reopened the bankruptcy case to seek a declaration that the $12,500 debt had been discharged.

The bankruptcy court, the district court and the 7th Circuit all ruled against Osicka.

Judge Michael Scudder Jr. wrote the opinion. Also on the panel were Judges Michael Brennan and Candace Jackson-Akiwumi, who has been mentioned as a possible U.S. Supreme Court nominee.

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