In the case of Kelly, Connecticut Chief State's Attorney, et al. v. Robinson (1986), the U.S. Supreme Court ruled that federal bankruptcy law does not discharge a state-imposed condition of probation requiring restitution to a crime victim. The court held that such obligations are part of a criminal sentence and thus fall under an exception in the Bankruptcy Code for fines or penalties owed to governmental units which are not discharged by bankruptcy proceedings. This decision was based on considerations about states' interests in rehabilitating convicted criminals and compensating crime victims, as well as historical treatment of criminal judgments in bankruptcy law.

In the dissenting opinion for Kelly, Connecticut Chief State's Attorney, et al. v. Robinson (1986), Justice Powell argued that federal bankruptcy law should not be interpreted to discharge fines imposed by state criminal courts as part of a defendant’s sentence. He contended that such an interpretation undermines states' rights and their ability to enforce their own laws effectively. Furthermore, he believed it was inappropriate for federal bankruptcy courts to interfere with state criminal proceedings in this way because it could potentially encourage individuals convicted of crimes to file for bankruptcy simply as a means of avoiding paying court-imposed fines or restitution orders. Justice Powell also expressed concern about the potential implications on public safety and justice if people were able to use bankruptcy as a loophole around punishment.