A judge may not be able to "wipe out" the debt, but there are ample means for transferring the liability for it to other parties, in this case, the state which wrongly convicted and imprisoned Souter (and if the conviction hinged on deliberate misrepresentation or withholding of evidence by any individual, then that individual can get hit with the liability). Souter will not have to pay this amount himself, though it may take a while to get it sorted out.
Thank you for that infromation.