Does The Debtor Have The Right To A Discharge Or Can Creditors Object To The Discharge
In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge. To object to the debtor’s discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.”
The court may deny a chapter 7 discharge for any of the reasons described in section 727 of the Bankruptcy Code, including failure to provide requested tax documents failure to complete a course on personal financial management transfer or concealment of property with intent to hinder, delay, or defraud creditors destruction or concealment of books or records perjury and other fraudulent acts failure to account for the loss of assets violation of a court order or an earlier discharge in an earlier case commenced within certain time frames before the date the petition was filed. If the issue of the debtor’s right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection.
Can The Discharge Be Revoked
The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor’s discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate committed one of several acts of impropriety described in section 727 of the Bankruptcy Code or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor’s discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.
In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.
Why Is The Judgment Still Shown As Active Even Though I Filed Bankruptcy
Bankruptcies are filed in the federal court system. That is where the law requires them to be filed.
Judgments are filed in the state court system. That is where it makes the most sense to file the vast majority of judgments.
Unfortunately, these two systems do not talk to each other all that often. Because of this, you must take on the job of letting the state court know when the federal court has wiped out a judgment.
There is Minnesota state law that sets forth the requirements for having your judgment changed from âActiveâ to âBankruptcy,â and we can do that for you. Call 651-464-8510 today.
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Will Filing For Bankruptcy Make The Lawsuit More Problematic
Its important to keep in mind that angry people tend to pursue litigation out of a need for vengeance rather than a monetary incentive. And, the federal bankruptcy court isnt always the best place to resolve such disagreements.
Here are a few situations that might give you and your lawyer strategic pause:
- When facing an adversarial opponent. If youre dealing with someone emotionally invested, such as a spurned ex-spouse or business partner, and assets are involved, the court might be inclined to see how the case develops. Because of the interest to creditors, filing bankruptcy might serve to move your lawsuit to a new forum onlythe bankruptcy courtand depending on the facts, that move might not be a good one.
- When facing a large organization. Sometimes companiesfor instance, utility providerswant to take a stand against fraud by pursuing a case even when recovering money isnt expected. A win would allow the company to continue to collect the amount owed . Keep in mind that a utility company can refuse to provide service to a bankrupt customer who wipes out a utility balance unless the customer pays a deposit.
- When youve done something questionable. Also, keep in mind that bankruptcy judges dont shrink from punishing inappropriate conduct. If one of the above situations exists and your case isnt very sympathetic, a bankruptcy court might not be the best place to resolve the issue.
Filing A Lien Avoidance Motion In Bankruptcy
You’ll want to claim your property’s exempt status in your bankruptcy paperwork and file a timely motion with the court. Keep in mind that if you have more equity than what you can exempt, your creditor will likely argue that the lien is valid only up to the exemption amount. Whether you file for Chapter 7 or Chapter 13 will determine how problematic this issue could be for you. For instance, the trustee might still sell the property in Chapter 7 bankruptcy and return the exempt portion to you. In Chapter 13, you’d likely be better off. You could keep the property by paying an amount equal to the nonexempt part through the Chapter 13 repayment plan.
Sometimes a lien avoidance motion doesn’t get filed during a bankruptcy. If you failed to do so, don’t panic. Most courts will allow you to handle the issue after the closure of the case.
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A Death An Estate A Struggling Business And A Long Fight
Eddie Wallace owned Ed Wallace Construction, Inc. when he died in a motorcycle accident in 2007. His two teenage children inherited his Estate, which consisted of his home and the company. His will named his sister, Susan Jacobs, as his personal representative. Jacobs became the executrix of the Estate and president of the company.
The children and Jacobs soon were locked in a contentious and lengthy dispute over whether Jacobs was breaching her fiduciary duties to the Estate and the company through self-dealing, mismanagement, and other improper conduct. Eventually, a Lincoln County Clerk of Court removed Jacobs as executrix. Later, the children sued Jacobs for breach of fiduciary duty, negligence, unjust enrichment, misrepresentation, and fraud. The children dismissed their claims of improper conduct by Jacobs to the Estate. The case went to trial on the claims of improper conduct by Jacobs against the company. A jury ruled for the company, awarding it $222,689 in compensatory damages and $40,000 in punitive damages. The verdict lumped all the compensatory awards into a single judgment. It did not differentiate between the claims for negligence and fraud.
After trial, Jacobs filed Chapter 7. The plaintiff, the assignee of the judgment, filed an adversary proceeding to deny Jacobs her discharge and to have the jury award declared non-dischargeable.
Upsolve Helps People Get Relief Without A Bankruptcy Attorney
Upsolve is a nonprofit organization dedicated to helping people get the debt relief they need. Weâve helped many people file Chapter 7 bankruptcy on their own. But, we know that isnât the answer for everyone. We also provide information about many other debt resolution options. And, if you donât qualify for our services or just prefer to have representation, we can help you find a local bankruptcy lawyer.
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Debts Never Discharged In Bankruptcy
While the goal of both Chapter 7 and Chapter 13 bankruptcy is to put your debts behind you so that you can move on with your life, not all debts are eligible for discharge.
The U.S. Bankruptcy Code lists 19 different categories of debts that cannot be discharged in Chapter 7, Chapter 13, or Chapter 12 . While the specifics vary somewhat among the different chapters, the most common examples of non-dischargeable debts are:
- Alimony and child support.
- Certain unpaid taxes, such as tax liens. However, some federal, state, and local taxes may be eligible for discharge if they date back several years.
- Debts for willful and malicious injury to another person or property. âWillful and maliciousâ here means deliberate and without just cause. In Chapter 13 bankruptcy, this applies only to injury to people debts for property damage may be discharged.
- Debts for death or personal injury caused by the debtorâs operation of a motor vehicle while intoxicated from alcohol or impaired by other substances.
- Debts that you failed to list in your bankruptcy filing.
How To Get Rid Of The Judgment Lien In Bankruptcy
Lets say you dont feel comfortable with the lien remaining in place.
If thats the case, youll need to file a motion to avoid the judgment lien in bankruptcy court.
To do so, youll need to prove that the lien is impairing an exemption to which you are entitled under the bankruptcy laws. You should expect to provide to your lawyer at least all of the following:
- valuation of the property
- balance due on all mortgages, home equity loans, and other liens and
- copy of the judgment from the state court.
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Does Bankruptcy Clear Judgments In 2021
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In a Nutshell
When a creditor or debt collector gets a judgment against you, it’s dischargeable as long as the original debt was dischargeable. The question becomes a bit more complicated if the creditor gets a judgment lien on your property. Hereâs how it works.
Written bythe Upsolve Team. Reviewed byAttorney Andrea Wimmer
Chapter 7 bankruptcy can eliminate many unsecured debts. Some unsecured debt can even be discharged in a Chapter 13 bankruptcy case. But, what happens if credit card debt, medical bills, personal loans, or other unsecured debt is reduced to judgment?
When a creditor or debt buyer files a lawsuit and gets a judgment against you, that generally doesnât change whether the debt is dischargeable. That means some judgment debts are dischargeable and some are nondischargeable. The question becomes a bit more complicated if the creditor gets a judgment lien on your property. But, you may be able to avoid judgment liens in bankruptcy, keep your property, and discharge the debt.
Hereâs how it works.
Can Bankruptcy Get Rid Of Judgments Against Me
The goal of filing bankruptcy is to eliminate your debts, and most debts are discharged in bankruptcy. The most well-known debts that are NOT discharged are debts related to divorce, most student loans, and some tax debts. But an ordinary debt based on a credit card or other loan, even if a creditor has gone to court and gotten a judgment, should be discharged in bankruptcy. However, if you have a judgment against you, there may be one additional step necessary to clear up the judgment.
Most people are familiar with the things that creditors can do to enforce a judgment against you. They can file a wage deduction against your income, they can freeze and garnishee your bank account, and they can bring you into court for an examination of your finances known as a citation. But they can also file a lien against your home and, unlike the other collection actions, you wont get a notice that they have done so.
This is as complicated as it sounds, but an experienced bankruptcy lawyer will know how to take the right action. Thats why its important that you keep any court documents you receive regarding any of your debts, and tell your lawyer about any law suits against you. Your lawyer can search court records and order a title search on your home, but these cost extra money and can delay the filing of your bankruptcy.
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What Are The Consequences For A Bankrupt Of Not Being Discharged
Not being discharged has important consequences for a bankrupt.
A person who is bankrupt may not borrow more than $1,000 without informing the lender that he/she is bankrupt. Failure to do so is an offence under the BIA that is liable to a fine, imprisonment or both.
Information pertaining to bankruptcy remains on an individual’s credit file for 6-7 years following discharge of a first-time bankrupt. Times may vary across provinces/territories.
- Date modified:
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.
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What Happens If A Judgment Is Issued Against You
If a judgment has been issued against you, the creditor can satisfy its judgment by freezing your bank account and taking a portion of your wages. Procedures differ from state to state. For example, in New York the creditor needs to get in touch with an enforcement officer such as a Marshal or Sheriff.
Can Bankruptcy Get Rid Of A Lawsuit Judgment
If you are wondering can bankruptcy get rid of a lawsuit judgment the answers is probably yes. You must qualify for bankruptcy and the underlying cause of the judgment must not be based upon fraud or other non-dischargeable reason. If you qualify for bankruptcy and otherwise feel that bankruptcy is right for you, you should consult a bankruptcy attorney right away. Filing a bankruptcy petition will place an automatic stay on the judgment and any enforcement actions.
Can Bankruptcy Get Rid of a Lawsuit Judgment? If you have questions about how to get rid of a judgment in bankruptcy, please give us a call at for a FREE Consultation over the phone or in person or you can email us now.
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How Do I Get Rid Of A Judgment Lien After My Bankruptcy Has Been Closed
July 20, 2016 By Peter Mullison
At least a few times a month, Ill get calls from people that go something like this: They filed bankruptcy several years ago. Theyre now trying to sell or refinance their home. The title company has discovered a judgment lien that has to be eliminated before the refinancing or sale. Once the homeowner discovers the lien and realizes that it was placed on their home prior to their bankruptcy, theyll call the creditor and ask them to remove the lien.
Unfortunately, the only thing that bankruptcy will automatically eliminate is the underlying debt to the creditor, meaning just the money that is owed. If a creditor has filed a lawsuit and gotten judgment, the creditor can record that judgment and place a lien against any real estate. The creditor will remove the lien, but will want to be paid the amount of the judgment or some settled amount.
Its possible to remove judgment liens in bankruptcy, but it requires filing a motion to avoid the lien. If you didnt disclose the lien to your bankruptcy attorney, or the attorney didnt run a title report to discover such liens, then no motion will be filed. Most attorneys will charge above their usual flat fee to prepare a motion to avoid.
If you need help removing a judgment lien after your bankruptcy case has been filed, give us a call.
Who Can Help Me Eliminate Liens In Bankruptcy
The bankruptcy process is governed by many rules, and filing bankruptcy can be quite complex for those without legal training. If you are considering filing bankruptcy, speak with an experienced and compassionate bankruptcy attorney who understands the issues you are facing and can help you develop strategies for keeping the assets that are most important to you.
Keywords: chapter 7 bankruptcy judgment lien lien avoidance
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Debt Relief Alternatives To Bankruptcy
Bankruptcy has serious consequences. A Chapter 7 bankruptcy will remain on your for 10 years, and a Chapter 13 will remain for seven years. That can make it more expensive or even impossible to borrow money in the future, such as for a mortgage or car loan, or to obtain a credit card. It can also affect your insurance rates.
So itâs worth exploring other types of debt relief before filing for bankruptcy. Debt relief typically involves negotiating with your creditors to make your debts more manageable, such as reducing the interest rates, canceling some portion of the debt, or giving you longer to repay. Debt relief often works to the creditorâs advantage, too, as they are likely to get more money out of the arrangement than if you were to declare bankruptcy.
You can negotiate on your own or hire a reputable debt relief company to help you. As with , there are scam artists who pose as debt relief experts, so be sure to check out any company that youâre considering. Investopedia publishes a regularly updated list of the best debt relief companies.