An attorney’s non-paid penalty for disciplinary costs isn’t exempt from bankruptcy as it’s a “penalty” paid to the state. The Seventh Circuit said Monday upholding his obligation to pay $12,000 before returning to bar membership in the Wisconsin law.

In addressing this issue in the first instance, its appeals court has joined with other federal appeals courts which have examined the case, the court declared.

The Wisconsin Supreme Court reprimanded attorney Tim Osicka for failing to respond to clients dissatisfied with his work and for not cooperating in a bar investigation by the state as per the U.S. Court of Appeals for the Seventh Circuit. The highest justice also ordered $150 compensation to a client and an amount of $12,500 to cover the costs associated with his disciplinary process.

Osicka shut down his business and filed for bankruptcy protection, including his attorney with the Wisconsin Office of Legal Regulation as an unsecured creditor. He was granted the general discharge of his debts. However, when he applied for reinstatement, the OLR advised him that he had to cover the costs to be sanctioned.

General discharge of debts in the Bankruptcy Code excepts government fines and forfeitures, penalties, and fines the judge Michael Y. Scudder Jr. declared in the Seventh Circuit. The sanction of Osicka was a punishment that he claimed.

First, the Wisconsin cost order rule “unambiguously sets out lawyer discipline for criminal action,” Scudder said.

The second reason is that Osicka’s penalty was not compensation for actual loss since the OLR “simply used money was already allotted” to fulfill its public duties, according to him.

“Bankruptcy court judges within our district have found no contradiction in the punishment for attorney misconduct and calculating the severity of punishment about government costs,” a way of making the punishment specific according to the situation the court can do, he added.

The judges Michael B. Brennan and Candace Jackson-Akiwumi were also on the panel.

The Law Firm Conway, Olejniczak & Jerry SC represented Osicka. The OLR illustrated the office of Osicka’s office of the Wisconsin attorney general.

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