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Can Filing Bankruptcy Wipe Out A Judgement

Can A Judgment Be Discharged In Bankruptcy

Can bankruptcy wipe out a mortgage foreclosure deficiency judgment?

Individuals or businesses that are finding it difficult to pay their creditors may want to consider filing for Chapter 7 or Chapter 13 bankruptcy in the U.S. Bankruptcy Court, in one of Texas four judicial districts. These programs involve the institution of a case in federal court for the purpose of reducing or eliminating individual debt. A third type of bankruptcy, Chapter 11, is available to businesses.

Learn more about Houston bankruptcy attorney, Seth Kretzer, who is ready to answer your questions about bankruptcy today.

Chapter 7 and Chapter 13 bankruptcy are distinct from one another, and each is available to an individual depending upon the severity of his or her personal debt. Chapter 7 bankruptcy is known as liquidation bankruptcy, and involves most of the filers property being sold to pay off debts. It is generally used by people who have limited income or no income and lack the ability to pay back any portion of their debts for the foreseeable future.

Chapter 13 bankruptcy, on the other hand, is known as reorganization bankruptcy. Filers of Chapter 13 bankruptcy work with the court to develop and follow a court-ordered repayment plan. Chapter 13 filers usually keep their personal and real property while paying back a portion of their debts.

Following the proceedings of Chapter 7 or Chapter 13 bankruptcy, the Bankruptcy Court will discharge unpayable debts.

Learn About Wiping Out Lawsuit Judgments In Bankruptcy

By Baran Bulkat, Attorney

Filing for bankruptcy relief will discharge most of your debts, including lawsuit judgments. But exceptions exist. Whether your bankruptcy will discharge a lawsuit judgment will depend on:

  • the type of judgment, and
  • whether the judgment creditor has placed a lien on your property.

Bankruptcy Eliminates Personal Liability For Mortgage Deficiencies

Lawsuits like these commonly force consumers into bankruptcy. Filing for bankruptcy eliminates the debtors personal liability for the underlying mortgage. In the example above, filing for bankruptcy would prevent the mortgage lender from seeking a deficiency judgment after foreclosure, the remaining mortgage balance would be discharged. If a deficiency judgment had already been entered, the bankruptcy filing would require the bank to stop with all collection activity including wage garnishment.

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The Bankruptcy Court Decides Discharge Issues

The Court began by considering the weight given to the proceedings in state court and the jury’s verdict. Dischargeability is a matter of federal law. Section 523 of the Bankruptcy Code lists the exceptions to discharge. They generally involve intentional, fraud-like conduct. The Court cannot automatically defer to a state-court judgment even one based on intentional torts like fraud but must independently compare the state law claims with Section 523. If the issues are identical, then findings by the state court may preclude re-litigation of identical issues in bankruptcy court under the doctrine of collateral estoppel. To make this decision, the Court considers the Verdict Sheet, Judgment, Jury Instructions, Pleadings, Briefs, Transcripts, and Exhibits from the state court.

The thrust of the Court’s inquiry is whether the state court made specific factual findings material to the discharge issues and the extent to which the elements of the claims on which judgment was entered match the elements of the Section 523 non-dischargeability claim. In In re Jacobs, the Bankruptcy Court looked at everything but still could not decide the issue without further evidence. As a result, the Court set the case for a second trial on the dischargeability issues.

At trial, the plaintiff has the burden of proof. The party seeking to establish an exception to the discharge of a debt must prove the requisite elements by a preponderance of the evidence.

Tax Liens & Bankruptcy

Can Government Debt Be Wiped Out in Bankruptcy?

Tax debt and tax liens are different things. Tax debt is simply money that you owe either the State of Wisconsin or the IRS. A tax lien is a legal judgment secured against your property to satisfy a tax obligation that you owe the state or federal government. Should you qualify for Chapter 7 bankruptcy, and meet all of the above criteria, unfortunately bankruptcy will not eliminate prior tax liens.

Your obligation to pay off the debt will be discharged, but not eliminated. However, the IRS will no longer be able to go after your income or bank account.

However if a tax lien was filed before you filed for bankruptcy, the lien will remain on the property. If you ever want to sell your property, you will have to pay off the lien before you can do so.

Do you have other tax related, or bankruptcy questions? Let us know. Were happy to help.

The experienced attorneys of Burr Law Office are here to answer your bankruptcy questions. Give us a call at today.

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Bankruptcy Doesn’t Stop Unforgivable Debts

Filing bankruptcy may give you ideas of a debt-free life. However, this is not the case for those who have debts that cannot be legally forgiven. You will still owe these debts despite filing for bankruptcy. The debts that bankruptcy cannot eliminate are:

  • Tax claims

Debts From Other Accidents

This applies not only to car accidents but to any injuries caused by a willful or malicious act. But cases where the accident occurred because of a simple driver error, and where no alcohol or drugs were involved, are dischargeable through Chapter 7 bankruptcy. This is an important distinction to make for individuals who are thinking about filing.

In some cases, individuals who get into an accident and are deemed at fault will place their property in lien to satisfy the judgment. This is often done by insurance companies if the individual does not have enough savings to satisfy the courts financial judgment. If these liens are in place, the bankruptcy judgment cannot discharge them.

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Is A Judgment A Dischargeable Debt In Bankruptcy

The manner in which a judgment is obtained has no bearing on whether bankruptcy can eliminate it. What matters is if the debt or obligation underlying the judgment is subject to discharge through bankruptcy.

  • Overdue rent or bill payments
  • Private debts to friends or family members

The attachment of a judgment to a debt does not change the debt’s eligibility for discharge through bankruptcy, and judgments associated with debts such as these are typically eliminated in the bankruptcy process.

Debts are discharged in a Chapter 7 proceeding following the debtor’s forfeiture of assets . Debts are discharged in a Chapter 13 bankruptcy after the debtor completes the repayment plan imposed by the bankruptcy court.

Neither Chapter 7 nor Chapter 13 bankruptcy can discharge all debts, however. Obligations that cannot be eliminated through bankruptcy include:

  • Child support and alimony
  • Mortgages
  • Obligations incurred through negligence, fraud or other criminal acts

In addition

  • Chapter 7 bankruptcy cannot discharge car loans, obligations to pay court costs or fees, or debts secured by liens .
  • Chapter 13 specifically cannot discharge certain tax debts.

One Response To What Happens To A Judgement If You File For Bankruptcy

Can Bankruptcy Help If I Have A Judgment or Lawsuit Against Me?

, 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.

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What Happens To A Settlement I Receive After Bankruptcy

Although a filer can keep most types of property acquired after filing, settlement proceeds are an exception. Keeping the settlement will depend on: whether its Chapter 7 or Chapter 13 bankruptcy. When you file for Chapter 7 bankruptcy, almost all property you own becomes part of the bankruptcy estate.

If You Already Have A Judgment Against You

In most cases, youll want to file for bankruptcy before you get a judgment against you. The most common reasons include:

  • not all debts that are reduced to judgments will go away in bankruptcy, and
  • even if you can discharge the debt, an involuntary lien placed on your property after the creditor gets a judgment will remain if you cant protect the property with a bankruptcy exemption.

That said, its almost always a good idea to file for bankruptcy before litigation ends, if possible. If not, youll want to file your case shortly after the court enters a judgment against you.

Example. Robin immediately filed for Chapter 7 bankruptcy after her creditor filed a lawsuit seeking a $10,000 judgment. The bankruptcy filing stopped the litigation and prevented the creditor from receiving a judgment . Robin was able to wipe out the $10,000 account and all future liability on the debt because, without a judgment, the creditor couldnt file a lien. The lawsuit had no impact on the bankruptcy case.

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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 Happens To Judgments And Liens In Bankruptcy

Can Filing for Bankruptcy Wipe Out Your Tax Debts?

It can be a complicated process, so if a creditor served you with a collection lawsuit but it hasn’t gone to judgment yet, meet with a bankruptcy attorney soon. Bankruptcy might stop the suit and erase the debt automatically, saving you significant time and money. However, if the judge already issued a decision and the creditor has received a money judgment, here’s what you’d do in bankruptcy.

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Does Bankruptcy Eliminate Liability For Deficiency Judgments

Its a common story in many areas of the country: real estate values have dropped and foreclosures have risen.

Borrowers with little hope of seeing their property values bounce back are still deciding to walk away from their mortgages.

Unfortunately, lenders often have the right to pursue these borrowers for a deficiency judgment. The good news is that bankruptcy eliminates personal liability for a mortgage deficiency.

Bankruptcy May Result In Removing A Judgment Lien Placed Against Home

You can avoid judgment liens on property resulting from creditors judgments when filing Chapter 7 bankruptcy if the lien is on exempt property.

Bankruptcy is a powerful debt relief tool. Not only can you discharge your personal obligation to pay your debts at the end of the bankruptcy case, but in some cases you can also eliminate judgment liens from your property.

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Where Do Judgments Come From

There are a variety of ways judgments can be rendered against you in response to creditor litigation or other legal actions.

  • A confession of judgment is a document in which you acknowledge liability for the debt. Creditors often require you to sign one as a condition of entering a repayment plan, with the understanding that they will use it to secure a judgment if you don’t stick to the plan.
  • A judgment by default is the result of you failing to respond to a creditor’s lawsuit.
  • A judgment by consent occurs when you respond to a creditor’s suit by accepting responsibility for the debt.
  • A judgment after trial occurs when you and your creditor argue your case before a court, and the court finds you liable for the debt.

When you file for bankruptcy, holders of judgments against you are required to stop efforts to collect what you owe them, so any wage garnishments or collections from bank accounts must cease. Any pending lawsuits seeking judgments against you are also suspended, and typically dismissed or withdrawn upon completion of the bankruptcy process.

Role Of The Case Trustee

Will bankruptcy override a judgement?

When a chapter 7 petition is filed, the U.S. trustee appoints an impartial case trustee to administer the case and liquidate the debtor’s nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor’s assets are exempt or subject to valid liens, the trustee will normally file a “no asset” report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an “asset” case at the outset, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002. A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502. In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor’s property should consult an attorney for advice.

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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.

How Bankruptcy Affects Criminal Cases

There are times when debt becomes oppressive. Bankruptcy offers the opportunity for relief from debt and a fresh start on a better life. But the difficulties posed by debt can be compounded when an individual is facing a criminal prosecution.

Can bankruptcy help someone who has been accused or convicted of a crime? The answer is: yes and no.

Start by getting legal advice

While your criminal case is pending, you should talk to your criminal defense attorney about the wisdom of filing bankruptcy. If your bankruptcy filing pertains to your crime, a judge might view it as a failure to accept responsibility. Even if the bankruptcy filing is unrelated to your prosecution, a judge might view it as evidence of bad character. For those reasons, your criminal defense lawyer might want you to delay filing a bankruptcy until after your prosecution is concluded.

After you are convicted, a bankruptcy attorney can advise you about the benefits you might or might not receive from filing bankruptcy. In many cases, a traditional chapter 7 liquidation will not wipe out debts that were imposed in your criminal case, but you might benefit from filing a debt repayment plan under chapter 13.

Fines and penalties

In civil and administrative proceedings, there is sometimes room to argue about whether the requirement to pay money to the government is a punishment. In criminal cases, the law makes clear that a fine is penal in nature and cannot be discharged in bankruptcy.

Restitution

Civil judgments

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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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