What Is A Judgment
A judgment is a court order, issued in response to a creditor’s suit against you, that declares you liable to pay what you owe them. A creditor with a judgment against you can do any or all of the following in pursuit of the money they are owed:
- Garnish your wages
- Take from your bank accounts
- Obtain a judgmentlien against your property , which could allow a creditor to seize the property, compel you to sell it, or entitle them to collect what they’re owed from the proceeds when you sell the property voluntarily.
Judgments can be issued in all kinds of civil matters, including personal injury liability suits, small-claims cases and even property-boundary disputesin any case where monetary damages can be assigned.
The most common judgments relevant to bankruptcy involve unpaid debts. Lenders, credit card issuers and other creditors may bring suit if you default on your accounts and secure judgments ordering you to pay what you owe.
The nature of the debt behind each judgment, and whether it is considered priority debt that cannot be discharged, will determine if bankruptcy can erase it.
When To Stop Digging A Hole You Can’t Escape
Most of us feel we have a moral obligation to pay what we owe if we can. But typically that ship has sailed by the time people realize they need to consider bankruptcy. They can continue trying to chip away at debts they may never be able to repay, prolonging the damage to their credit scores and diverting money they could use to support themselves in retirement. Or they can recognize an impossible situation, deal with it and move on.
If you can pay your bills, obviously you should. If youre struggling, check out your options for debt relief. But bankruptcy may be the best option if your consumer debt the kinds listed above that can be erased equals more than half your income, or if it would take you five or more years to pay off that debt even with extreme austerity measures.
Heres what you need to know:
You need a bankruptcy attorney: Its easy to make a mistake in the complicated paperwork, and an error could cause your case to be dismissed. If that happens, you end up with no relief but still have credit scores tanked by the bankruptcy filing.
Dont wait too long: Theres a misconception that people file bankruptcy at the drop of a hat or when they still have other options. The reality for most is quite different. Some drain assets, such as their retirement accounts, that could have been protected from creditors in bankruptcy. People throw good money after bad until they have no money left to seek relief.
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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Types Of Civil Lawsuits Bankruptcy Stops
When your bankruptcy case is approved, the court is given jurisdiction over any cases involving the allegation that you owe someone money. This could be due to failing to pay a debt or being held liable for someones accident injuries. For qualifying cases, the court would handle the underlying debt and the lawsuit would be dismissed.
Some of the most common types of lawsuits that bankruptcy can stop include:
- Unpaid credit card balances
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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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How To File Chapter 7 Bankruptcy
The most important factor in filing Chapter 7 bankruptcy is finding an experienced bankruptcy attorney. Once you decide on an attorney, you can refer creditors to your lawyers office. Filing the petition will trigger an automatic stay, which means creditors cant pursue lawsuits, garnish your wages or contact you about your debts. Heres a potential timetable:
If youre qualified, it will take 4-6 months to complete the bankruptcy process.
Here are the steps you must take when filing for bankruptcy:
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.
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Cash Collateral Adequate Protection And Operating Capital
Although the preparation, confirmation, and implementation of a plan of reorganization is at the heart of a chapter 11 case, other issues may arise that must be addressed by the debtor in possession. The debtor in possession may use, sell, or lease property of the estate in the ordinary course of its business, without prior approval, unless the court orders otherwise. 11 U.S.C. § 363. If the intended sale or use is outside the ordinary course of its business, the debtor must obtain permission from the court.
A debtor in possession may not use “cash collateral” without the consent of the secured party or authorization by the court, which must first examine whether the interest of the secured party is adequately protected. 11 U.S.C. § 363. Section 363 defines “cash collateral” as cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents, whenever acquired, in which the estate and an entity other than the estate have an interest. It includes the proceeds, products, offspring, rents, or profits of property and the fees, charges, accounts or payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a creditor’s security interest.
When a chapter 11 debtor needs operating capital, it may be able to obtain it from a lender by giving the lender a court-approved “superpriority” over other unsecured creditors or a lien on property of the estate. 11 U.S.C. § 364.
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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Are You Eligible To File Bankruptcy
Some judgments are not dischargeable in bankruptcy, meaning your judgment will not be erased if you file bankruptcy. Non-dischargeable debts might include:
- Child support
- Government-owed debts
If you file bankruptcy and owe on a non-dischargeable judgment, you will still be liable for this debt after the bankruptcy case closes. The only exception is if they are paid in full through a Chapter 13 plan.
Debts That Can And Cant Be Discharged In Chapter 7 Bankruptcy
Chapter 7 should dismiss most of the debts you owe, but there are some hard-and-fast debts that cant be discharged in Chapter 7.
The list of non-dischargeable debts includes:
- Child support
- Student loans must prove undue hardship
- HOA fees if you surrender your home or condo
- Any other form of unsecured debt.
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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.
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Appointment Or Election Of A Case Trustee
Although the appointment of a case trustee is a rarity in a chapter 11 case, a party in interest or the U.S. trustee can request the appointment of a case trustee or examiner at any time prior to confirmation in a chapter 11 case. The court, on motion by a party in interest or the U.S. trustee and after notice and hearing, shall order the appointment of a case trustee for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or if such an appointment is in the interest of creditors, any equity security holders, and other interests of the estate. 11 U.S.C. § 1104. Moreover, the U.S. trustee is required to move for appointment of a trustee if there are reasonable grounds to believe that any of the parties in control of the debtor “participated in actual fraud, dishonesty or criminal conduct in the management of the debtor or the debtor’s financial reporting.” 11 U.S.C. § 1104. The trustee is appointed by the U.S. trustee, after consultation with parties in interest and subject to the court’s approval. Fed. R. Bankr. P. 2007.1. Alternatively, a trustee in a case may be elected if a party in interest requests the election of a trustee within 30 days after the court orders the appointment of a trustee. In that instance, the U.S. trustee convenes a meeting of creditors for the purpose of electing a person to serve as trustee in the case. 11 U.S.C. § 1104.
As discussed above, a trustee is appointed in each subchapter V case. 11 U.S.C. § 1183.
Which Debts Are Dischargeable
As discussed above, filing a bankruptcy case discharges your liability if the original debt qualifies for discharge. Bankruptcy law says that all debts are dischargeable unless the code states otherwise. Here are debts that never go away:
- child support and alimony
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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.
There Are Only 3 Ways To Get Rid Of A Judgment
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There are only 3 ways to get rid of a judgment: 1) Vacate it 2) Satisfy it, or 3) Dischargeit. In your analysis of which approach is best for you, you should follow that same order: First, can I vacate the judgment? If not, can I satisfy the judgment? If not, can I discharge the judgment in bankruptcy?
1) Is vacating the judgment an option for me? If you contested the case and the court entered a judgment against you, vacating the judgment will be very unlikely. If however a default judgment was entered against you, you should determine if you can have the judgment vacated . In order to vacate a judgment in California, You must file a motion with the court asking the judge to vacate or set aside the judgment. Among other things, you must tell the judge why you did not respond to the lawsuit .
The reason and the timing of your motion are very important and really should not be done without the assistance of a lawyer. Generally speaking, if you had no actual notice of the lawsuit , you have two years from the date the judgment was entered against you to make the motion. If you knew about the lawsuit but did not timely respond, you have 6 months to make the motion based upon excusable neglect. The horror story I hear all too often is that the judgment is more than 2 years old, the consumer never knew about it, and now nothing can be done about it. The 2-year limit is a law that needs to be changed.
Greg Fitzgerald, Esq.
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