Can Bankruptcy Eliminate A Personal Injury Judgment
We encounter personal injury judgments in two contexts: the injured party or injured partys insurance company has a judgment against you for a car accident, or whether personal injury judgments can be wiped out in a bankruptcy case. The simple answer is that, yes, personal injury judgments can be discharged, or eliminated, by filing bankruptcy.
Florida Statute Section 324.121 provides that the Florida Department of Highway Safety and Motor Vehicles has the authority to suspend the driver license and registration of anyone who has a personal injury judgment entered against them, with a few exceptions. Unfortunately, many judgment debtors come to us after the car accident and after the judgment has been entered and sent to the Florida DMV. In that scenario, we have two options: pay off the judgment, or negotiate to pay off the judgment in installments , or file bankruptcy to discharge the judgment. Once discharged, you can contact the DMV to have your driver license suspension reversed.
Incidentally, there is a split amongst the courts as to whether the insurance company that obtained the personal injury judgment has any responsibility to cooperate in getting the driver license suspension reversed.
The next question, then, is whether a bankruptcy will eliminate a personal injury judgment. The answer is largely yes. Under Section 523 of the Bankruptcy Code, the bankruptcy code does not eliminate debts:
Involuntary Bankruptcy More For Corporations Than Individuals
But is it possible to force someone into bankruptcy, as the collection agent suggests?
How often does this happen in real life?
If you are a corporation that has many millions of dollars in debt, it happens occasionally.
But, in my over three decades doing insolvency work, I dont recall a single time where a creditor has petitioned a person into bankruptcy. Im sure its happened. Its just extremely rare for a creditor or debt collector to force someone into personal bankruptcy.
Why? Because whenever the court is involved, lawyers are involved, and lawyers cost money.
I asked one of the most senior insolvency lawyers in Canada what it would cost in legal fees to file a bankruptcy petition in bankruptcy court. He said the minimum cost to petition a debtor into bankruptcy would be $5,000. Why so expensive? Because the lawyer is required to notify all interested parties and prepare documents to convince the judge that an act of bankruptcy has occurred.
The bankruptcy court takes these applications very seriously because the court does not want the bankruptcy process to be used for normal collection activity. If a collection agency wants to get the court involved, the proper venue is Small Claims Court for debts of $35,000 or less or Superior Court for larger debts.
The lawyer or applicant would also have to find a Licensed Insolvency Trustee willing to act in the petition.
Theres no chance its a silly business decision.
Can You File For Bankruptcy To Avoid Paying A Judgment
Filing for bankruptcy is one option people have for handling debt or restructuring payments they are struggling to make. Unlike working directly with creditors, bankruptcy affords an individual or couple legal protections on both the state and federal levels that limit their creditors options. You can file for bankruptcy to pay back a delinquent mortgage, discharge medical debt or credit card debt, and, in some cases, avoid paying a judgment.
If you have a judgment against you, that means a creditor filed a lawsuit and obtained a court order indicating that you were legally required to pay the debt. A judgment grants a creditor legal options to collect the debt, including garnishing wages, accessing your bank account, or placing a judgment lien on your home. How the judgment will be treated in bankruptcy depends on a number of factors.
The Bankruptcy Code is complicated, so it is critical to speak with our experienced Philadelphia bankruptcy attorneys to understand how it could benefit your situation. While it is advisable to file for bankruptcy before a judgment is entered, you still have options after the fact. Call Young, Marr & Associates in Pennsylvania at 701-6519 or New Jersey at 755-311 to discuss the advantages of filing for bankruptcy.
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Hold Harmless / Indemnification Language
You should strongly consider including hold harmless / indemnification language in divorce agreements and orders. If a spouse is obligated to pay a divorce-related debt, the indemnification language would make it near irrefutable that the non-filing spouse has legal standing to challenge the treatment and classification and dischargeability of a debt included in the filing spouses bankruptcy.
A typical hold harmless clause would be Spouse A is responsible for the payment in full of the debt owed to XYZ Corp. in the approximate amount of $99,000.00, and shall hold harmless and indemnify Spouse B for said debt. The parties intention is that the payment of this debt is for maintenance and support of Spouse B.
How Bankruptcy Stops Creditor Collection Actions
Most people end up with a money judgment after a . If you fail to file an answer or you lose the case, the court will enter a judgment for the amount of the debt, plus other amounts, such as the attorneys’ fees and costs for bringing the suit.
Depending on the state laws, a judgment creditor will likely be able to use the judgment to have your wages or bank account garnished , or even seize and sell your property. When you file for bankruptcy, the automatic stayan order that the court puts in placewill stop such collection attempts.
After you successfully finish your Chapter 7 bankruptcy or Chapter 13 matter, you’ll likely wipe out the judgment creditor’s right to collect on the debt.
But that doesn’t always mean that you’ll be out of the clear. The money judgment might provide the creditor with a lien that gives the creditor some rights to your property.
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Is It Included In Your Chapter 7 Bankruptcy Fees
Depending on when the judgment is issued, taking care of the motion in bankruptcy court may or may not be made a part of your retainer agreement. You want to make sure your lawyer knows about all pending lawsuits and outstanding judgments so that he or she can properly assess your situation.
Read the retainer agreement carefully and ask questions. Without full information about whats covered and what isnt, theres no way for you to plan your post-bankruptcy future.
Should You Make A Voluntary Assignment Or Ignore The Notice
So, what should you do if you get one of these emails?
First, confirm that the debt is real. If you dont owe the debt, dont pay it. Often collection letters are sent to someone with a similar name to the actual debtor, or perhaps you already paid the debt. If so, send proof to the collector that you dont owe the debt.
If you do owe the debt, determine how old the debt is. If the debt is past the limitation period, it is highly unlikely that the collector will commence legal action. If the debt doesnt show up on your credit report, you could ignore it.
If the debt is within the limitation period or harms your credit score, you have options.
If this is your only debt, you can work out a plan directly with the collection agent. They may be willing to accept less than the full amount if you pay it in full. You must get a written confirmation of the deal before you send them any money.
If you have other debts, paying this one debt may cause it to be reported as paid on your credit report, which then alerts all of your other creditors that you have money and are paying debts, which may lead to a flood of collection calls.
If you cant pay your bills, this may not be your only collection action. If you have significant debts, I suggest you talk to a Licensed Insolvency Trustee to review possible debt relief options.
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What Does It Mean To Be Judgment Proof
It means that even if a creditor has a judgment, they canât take anything from you because everything you own is exempt. If your only income is in the form of social security benefits, you donât own any real estate, and you donât have any expensive personal property, youâre most likely judgment proof.
Even though the creditor can’t collect their money from you, they can still try to demand payment, which can be irritating to deal with regularly.
What Happens To Judgments And Liens In Bankruptcy
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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Objecting To Confirmation / Motion To Dismiss / Proof Of Claim
In a Chapter 13, the debtor must propose a plan and the plan must be confirmed by order of the Court. The plan must propose to pay back any DSO arrearage in full and must list the DSO as a priority unsecured debt . If the debtor spouse fails to properly list or account for the debts owed to the non-filing spouse, then the non-filing spouse should file an objection to the confirmation of the plan.
Additionally, if the sole purpose of the filing of the bankruptcy was to frustrate the collection of the amounts owed to the non-filing spouse, then a Motion to Dismiss for a bad-faith filing should be considered. See In re Ellis, 406 B.R. 736
Lastly, the non-filing spouse should file a proper proof of claim to ensure that they are paid and have not waived any claim to any amounts that they are owed.
Do Judgments Impact Your Credit
For many years, judgments and liens appeared in the public records section of credit reports, but that is no longer the case. Bankruptcies are now the only public records collected and listed on credit reports maintained by the three national .
Chapter 7 bankruptcies appear on your credit reports for 10 years from the date of the bankruptcy filing, while Chapter 13 bankruptcies remain for seven years from the filing date.
A bankruptcy negatively affects your credit score as long as it remains on your credit report, but its impact diminishes over time. Since judgments and liens no longer appear on credit reports, they have no effect on credit scores.
Legal judgments and their consequences, including garnished wages and drained bank accounts, can compound the distress of mounting debt. Filing bankruptcy is stressful in its own right, but it can bring instant relief from judgments, in many cases eliminating them permanently.
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If You Are The Administrator Of A Deceased Estate
If you are the administrator of the deceased individualâs estate, to bankrupt them you must:
- Present a petition to the Federal or Federal Circuit Court. You need to include 2 forms with your petition:
If the court makes an order that the estate be administered under this Part, this makes the estate bankrupt:
- You must, before the end of the period of 2 business days beginning on the day the order was made, give a copy of the order to us.
- We register the bankruptcy on the National Personal Insolvency Index .
- A trustee is appointed to manage the bankruptcy. If you donât nominate a trustee, we choose one for you.
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Sawin & Shea Indianapolis Bankruptcy Attorneys
Filing for bankruptcy is not the end. Its the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of the overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.
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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 .
What To Do About A Judgement Against You For Credit Card Debt
If and when a credit card company gets a court judgment against you for unpaid credit card debt, you need to prepare yourself for the creditors attempts to collect the judgment. Know that a credit card judgment is not a criminal matter. It is not illegal for you not to pay a credit card company, and the courts cannot put you in jail if you do not pay the judgment. The courts credit card judgment also does not automatically take your money or your future earnings. It is up to the creditor to use legal tools to collect money from you to satisfy its judgment. Often, a creditor will not make any attempt to collect a small judgment because the legal costs of collection are greater than the creditors probable recovery. Also, most court judgments do not reimburse the creditor for its own legal fees incurred in trying to collect the judgment.
Some people faced with a credit card judgment immediately think they will have to file bankruptcy. This is a mistake. The judgment creditor has more leverage in bankruptcy court, and bankruptcy law strips some of a debtors asset exemptions. Bankruptcy should be the debtors last resort.
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A Judgment Lien Can Survive Your Bankruptcy Case
While you may be able to eliminate the dischargeable debt the judgment against you is based on, there are other things to watch out for. Your creditor may obtain a lien on your property that gives them the right to it. Thus, the creditor can exercise the right to be paid from the proceeds when you sell the property.
The worst part is that a judgment lien can survive your bankruptcy case and make it difficult to sell or refinance your property in the long run. However, with a knowledgeable Charlotte bankruptcy attorney by your side, you can file a motion to remove the lien.
Collection Of Judgments By Creditors
Most judgments begin as lawsuits. If you ignore the lawsuit, the judge may issue a default judgment. Fighting the lawsuit can still result in a judgment against you if you lose the lawsuit.
Once a party has a judgment against you, it can take additional legal action to collect the debt. In some states, judgment creditors may seize property to satisfy the judgment. In other states, judgment creditors are allowed to garnish wages to satisfy the judgment.
The good news is that filing bankruptcy can get rid of the judgment.
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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.
Why A Judgment Is Bad News For You
If your creditor files a lawsuit over the debt you owe them, the court will most likely enter a judgment against you for the amount of the money that you owe along with other costs. The creditor may use the judgment to garnish your wages or may even attempt to seize your property.
Filing for bankruptcy will result in an automatic stay. If ordered by the court, the automatic injunction immediately stops most civil lawsuits against you and prohibits any collection actions. After you finish your Chapter 7 or Chapter 13 bankruptcy, the creditor automatically loses their right to collect the debt.
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What Are Lawsuits And Judgments
A lawsuit is simply a way for a creditor to get a court to issue an order that says the money is owed to the creditor, and the amount.
The Judgment, in turn, gives the creditor the ability to try to collect the debt by whatever means are allowed pursuant to applicable state law.
In California, this includes wage garnishment, seizing funds in bank accounts, and placing a lien against real estate and other assets.
So, it is obviously best to file a bankruptcy case before a judgment is entered on the lawsuit.