What Can The Debtor Do If A Creditor Attempts To Collect A Discharged Debt After The Case Is Concluded
If a creditor attempts collection efforts on a discharged debt, the debtor can file a motion with the court, reporting the action and asking that the case be reopened to address the matter. The bankruptcy court will often do so to ensure that the discharge is not violated. The discharge constitutes a permanent statutory injunction prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt. A creditor can be sanctioned by the court for violating the discharge injunction. The normal sanction for violating the discharge injunction is civil contempt, which is often punishable by a fine.
One Response To What Happens To A Judgement If You File For Bankruptcy
, Doug Stuive, CA | Trustee | CIRP said:
A judgement is basically a court order that indicates you have an outstanding debt you are required to pay.
Judgements that resulted from regular debts, like old loans, credit cards, civil lawsuits, can be included in a bankruptcy or consumer proposal filing. This would release you from your obligation to pay the judgement.
If you have judgement from a criminal act or from child or spousal support this can not be included in a bankruptcy or consumer proposal.
A bankruptcy filing stays on your record for six years from your date of discharge. After that time period, the bankruptcy and the debt that was part of the bankruptcy are removed from your credit history.
The judgement should also be removed at this time.
If you have a judgement against you that you know you will not be able to pay, consult one of our trusted advisors in Ontario to find out if filing a consumer proposal or a bankruptcy makes sense for your situation. We are here to help.
Can You Avoid The Judgment Lien In Bankruptcy
Obtaining a bankruptcy discharge will give you little comfort if the creditor’s lien is still attached to your assets, such as your house. If the lien remains, the creditor will retain a right to sell the property after the bankruptcy case’s conclusion or wait until you sell it to take its share.
However, there is a way that you can get rid of the judgment lien in your bankruptcy. It is called lien avoidance. Here are the three conditions you’ll need to prove to qualify for lien avoidance:
- the lien came from a money judgment issued against you
- you have property equity that you can claim an exemption against, and
- the judgment lien eats up some or all of the equity that you could have exempted.
To avoid a judgment lien, you must follow bankruptcy procedures, and it’s best to act quickly . Learn more about the different types of property liens.
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What Only Chapter 13 Bankruptcy Can Do
Chapter 7 and 13 each offer unique solutions to debt problems. The two bankruptcy types work very differently. For instance, how quickly your debt will get wiped out will depend on the chapter you file:
- Chapter 7 bankruptcy. This chapter takes an average of three to four months to complete. Learn more about erasing your debt in Chapter 7 bankruptcy.
- Chapter 13 bankruptcy. If you file for Chapter 13 rather than Chapter 7, youll likely have to pay back some portion of your unsecured debts through a three- to five-year repayment plan. However, any unsecured debt balance that remains after completing your repayment plan will be discharged. Find out how to pay off or discharge your debts in Chapter 13 bankruptcy.
Chapter 7 is primarily for low-income filers, and therefore, it wont help you keep property if youre behind on payments. But, if you have enough income to pay at least something to creditors, then youll be able to take advantage of the additional benefits offered by Chapter 13.
Here are some of the things that Chapter 13 can do.
Stop a mortgage foreclosure. Filing for Chapter 13 bankruptcy will stop a foreclosure and force the lender to accept a plan that will allow you to make up the missed payments over time. To make this plan work, you must demonstrate that you have enough income to pay back payments and remain current on future payments. Learn more about your home and mortgage in Chapter 13 bankruptcy.
Does The Creditor Know You Got A Discharge
The reason that the bankruptcy paperwork requires that you list all your creditors with good mailing addresses is so they get the word when your discharge is entered. Notice to creditors is also about due process: remember from civics?
Once you get a discharge, the court mails a copy of the courts order to everyone on the list of creditors you assembled at the beginning of the case.
A creditor left off the list, or to whom a debt is transferred after the bankruptcy filing, has no way of knowing that youve discharged your debts.
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Keeping Your Discharge Certificate
The paperwork that you receive once your discharge is complete is important to keep in a safe place.
You can use it to prove that you are no longer going through bankruptcy, and you may need it if you are applying for credit or need proof of your discharge for other reasons.
It can be helpful to have if the bankruptcy is later not removed from your credit report when it should be, for example.
You should keep it in the years after your discharge, preferably at least until your bankruptcy no longer shows on your credit report.
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Can Chapter 7 Bankruptcy Discharge Traffic Fines
Unfortunately, there are certain types of debts that are not discharged in a Chapter 7 bankruptcy and traffic fines are one of them. The types of traffic fines that are non-dischargeable include: traffic violations, traffic tickets, parking tickets, toll violations and court fines. Even though these fines are not dischargeable in a Chapter 7 bankruptcy, you may be able to eliminate these debts by filing a Chapter 13 bankruptcy instead. In a Chapter 13 bankruptcy, you will enter into a 3-5 year repayment plan which will allow you time to pay these fines off. This can be especially helpful if your driverâs license has been suspended. If you can show that you are in a bankruptcy repayment plan making monthly payments on your fines, you may be able to get your license reinstated. You can speak with a bankruptcy attorney to help you decide if you should file a Chapter 13 bankruptcy to help you.
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What About For Nondischargeable Debt
Nondischargeable debts include student loans, child support, spousal obligations, debts owed to the government and more.
As a general rule, it is better to file a bankruptcy case before a judgment is entered. In most cases, if a judgment has been entered or a lawsuit has been filed, it does not change whether you can discharge the debt in the bankruptcy.
- Fraud used to get money on goods and services
- An injury caused by malicious acts
- Fraud committed while acting as a guardian or trustee
If the judgment does not fall into these categories, the creditor will not likely object to your discharge.
Is The Judgment For Dischargeable Or Nondischargeable Debt
If the unpaid debt the creditor sued you for is dischargeable, bankruptcy can eliminate it. This includes credit card debt, medical bills, personal loans, and utility bills.
However, if the debt the judgment against you is based on is nondischargeable, it cant be wiped away in bankruptcy. This includes most student loans, child support or alimony, tax debt, and DWI death or injury awards. It also includes debts creditors can request the court to find non-dischargeable through an adversary proceeding .
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Sexual Harassment Judgment Not Dischargeable In Bankruptcy Court Holds
In In re Townsend, No. 15-43411-CEC, 2016 WL 2927522 , the court granted plaintiffs motion for summary judgment that a judgment entered on a $450,000 jury verdict in Ganci v. U.S. Limousine Service and Raymond Townsend, EDNY 10-cv-3027, was non-dischargeable under the Bankruptcy Code.
The Bankruptcy Code exempts from discharge any debt for willful and malicious injury by the debtor to another entity or to the property of another entity.
The court held that the jurys findings that defendant directly subjected plaintiff to a sexual harassment and a hostile work environment established the elements of non-dischargeability under the Code.
As to the willful prong, the court explained:
As to the malicious prong:
Find Out If You Can Wipe Out A Lawsuit Judgment In Bankruptcy And What Happens If The Creditor Has A Lien Against Some Of Your Property
By Cara O’Neill, Attorney
If a creditor gets a judgment against you and the debt is dischargeable in a Chapter 7 bankruptcy, filing for bankruptcy will wipe out a creditor’s ability to collect. Judgments, however, can create a lien on your property. And liens don’t go away in bankruptcy automatically. So it’s possible to wipe out a judgment in bankruptcy and remain obligated to pay the lien.
Before determining whether you can use bankruptcy to get out from under a judgment entirely, you’ll need to learn:
- the differences between a judgment and a judgment lien
- whether you can erase the debt in bankruptcy
- if you can exempt the property securing the lien, and
- the steps involving lien avoidance in Chapter 7 and Chapter 13.
Lien removal is a tricky area of bankruptcy law that could require professional help. If you’d like to ensure that you protect valuable property to the best of your ability, it’s prudent to seek the advice of a knowledgeable bankruptcy attorney.
For step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
What If You Do Nothing
Assuming the underlying debt is wiped out in your Chapter 7 bankruptcy case, the judgment remains nothing more than an empty shell.
The creditor cannot freeze your bank account, seize your wages, or take any further action against you.
However, the judgment may remain on record as a valid lien against any property you owned at the time your Chapter 7 bankruptcy was filed. The creditor cant do anything with the lien, but it will need to be paid off in the event that you try to sell the property while the judgment is in place.
Under California law, a judgment becomes a lien on land, a house or other building you own only if the judgment creditor files an Abstract of Judgment. In other states such as New York, however, the judgment is automatically a lien against property.
How A Default Judgment Impacts Your Life
Before a lawsuit, the only way the collector can get money from you is by convincing you to make a payment. Phone calls and letters pour in, each one demanding payment and threatening a variety of dire consequences. Ultimately, the decision is a voluntary one either you pay the debt, or you dont pay the debt.
That all changes when the creditor obtains a default judgment. The judgment is an order from the court requiring you to pay not only the debt but also continuing interest at the legal maximum. In many cases, the judgment also holds you responsible for payment of the creditors legal fees and costs. Once the collector obtains a default judgment, A default judgment is a common reason to consider filing for bankruptcy. In New York a judgment creditor has the right to freeze your bank account, take part of your wages, and continue to add interest on the amount due at a statutory rate until the debt is paid in full.
If youre living paycheck-to-paycheck as is, the prospect of having to surrender a portion of your income isnt appealing. And given the high cost of living in places like Los Angeles and New York, every dollar counts.
Its true that filing for bankruptcy will stop the income execution , lift the hold on your bank accounts, and give you some breathing room. But even the bankruptcy discharge wont eliminate the impact of that default judgment against you.
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When Can You File Bankruptcy On A Judgment Ask A Charlotte Nc Bankruptcy Lawyer
Can you file bankruptcy on a judgment? The simple answer is yes, but avoiding liens through bankruptcy can be a tricky process. The best way to protect yourself is to consult an experienced Charlotte NC bankruptcy attorney. At the Law the Office of Jack G. Lezman, PLLC, we can help you understand your options. Contact us today for a consultation.
What About Punitive Damages
The Bankruptcy Court concluded that a state-court punitive damages award is not automatically non-dischargeable in bankruptcy because, at least in North Carolina, courts can allow punitive damages for conduct that does not always lead to a non-dischargeable debt in bankruptcy.
In In re Jacobs, the plaintiff could not meet the burden of proof on any exception to discharge. A crucial issue was that the plaintiff had to prove the elements of a discharge exception as to the company since the company was the judgment creditor. Because the claims against Jacobs as to the Estate had been dismissed, conduct related to the Estate that qualified as an exception to discharge was irrelevant. As a result, their judgment was discharged.
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Personal Injury Judgments: When They Might Be Non
The Bankruptcy Code does specify certain situations in which an unsecured debt that is otherwise dischargeable will not be discharged in a Chapter 7 or Chapter 13 process.
One example is a debt incurred in a fraudulent manner.
A debt incurred for death or personal injury due to the debtors operation of a motor vehicle, vessel or aircraft if such operation was unlawful due to the drivers intoxication from using alcohol, drugs, or other such substance.
In other words, a personal injury judgment or claim arising from drunk or drugged driving will not be dischargeable in bankruptcy.
Additionally, a debt incurred for willful and malicious injury to another entity or to the property of another entity.
The definition of entity in the Bankruptcy Code includes people.
Thus, if, in a fit of road rage, willfully drive your car into a queue of people lining up for a movie, bankruptcy will not save you from the bevy of lawsuits that will follow.
What Is A Discharge In Bankruptcy
A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
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How To Discharge Irs Tax Debt In Bankruptcy
If all four of the conditions below are satisfied your IRS tax debt may be discharged in bankruptcy. If the debt is discharged, the penalties and interest on the taxes will also be discharged in the bankruptcy.
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Grounds For Denial Of A Debt Discharge
The grounds for denying an individual debtor a discharge in a Chapter 7 case are narrow. They are construed against the moving party .
Among other reasons, the court may deny the debtor a discharge if it finds that the debtor:
- Failed to keep or produce adequate books or financial records
- Failed to explain any loss of assets
- Committed a bankruptcy crime such as perjury
- Failed to obey a lawful order of the bankruptcy court
- Fraudulently transferred, concealed, or destroyed property that would have become the property of the estate
- Failed to complete an approved instructional course concerning financial management
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Filing Bankruptcy Before Or After A Judgment
If you file a petition for bankruptcy before a judgment is issued, the automatic stay will stop the lawsuit immediately. And you will avoid destroying your credit score further. It’s the best way to deal with a judgment if you plan to file bankruptcy. This is important because once a judgment is filed, it becomes a lien. Filing bankruptcy can discharge the debt. But it will not get rid of the lien.