What Effect Does Bankruptcy Have On Judgments
A judgment is a court order indicating that you owe a balance to your creditors. In the event that you cannot pay your debt on time, your creditors can use judgments to try to collect your personal property or garnish your wages to satisfy the debt.
For creditors to obtain a judgment, they will file a lawsuit against you seeking payment on your debts. If you dont respond, your creditors win by default and will have the go signal to do things such as collect your property, garnish your wages, seize your bank accounts, or place a lien against all your assets.
Once a judgment has been passed by the court, this gives your creditor more power to use your property to settle your debts. To make matters worse, a judgment is in the public record so it will appear on your credit report, which can be damaging to your overall financial health.
And since they last for a period of 10 years, it gives your creditors a powerful to collect anything that they can so that your debts with them are settled.
Filing Bankruptcy When The Car Accident Wasnt Your Fault
Auto accidents can be devastating physically, practically, and financially. In addition to causing personal injury, they can force victims to assume a great deal of debt that they may not be in a position to pay down. From medical expenses to repairing a vehicle, making up for lost wages and addressing property damage, the aftermath of a motor vehicle accident can be frustratingly expensive.
If the car accident you were involved in was either not your fault or less than 49% your fault, a personal injury attorney can help you to file an accident claim with the goal of obtaining a personal injury settlement from the at-fault party and/or their insurance company. However, not all legitimate personal injury claims are ultimately so successful that they result in the kind of damage award amount that the victim deserves.
For example, if you were the victim of a hit-and-run scenario, you may be unable to sue the at-fault party and/or their insurance carrier. Similarly, if the at-fault party doesnât have car insurance coverage, there may be no way to secure compensation to cover all the bills youâve incurred since the time of the accident. If this is the case, choosing to file bankruptcy may be the best option available to you.
The Chapter 7 Discharge
A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004.
The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and 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 satisfactorily 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 property of the estate or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727 Fed. R. Bankr. P. 4005.
You May Like: How Many Times Has Trump Filed For Bankruptcy
Filing For Bankruptcy Will Get Rid Of Some But Not All Lawsuits
By Cara O’Neill, Attorney
Many people choose to file for bankruptcy after being served with a lawsuit with good reasonbankruptcy will stop many legal actions cold. Even so, a bankruptcy case won’t stop every action you might face. In this article, you’ll learn how bankruptcy affects legal cases.
You’ll find a complete overview of the bankruptcy process in What You Need to Know to File for Bankruptcy in 2021.
What If My Creditor Does Obtain A Judgment
If filing bankruptcy with a pending lawsuit doesnt work out and your creditor gets a judgment before you file, thats ok. We can file a motion together with your bankruptcy filing, to have the judgment removed from your record. This means that when you sell your real property , you will not have to pay the judgment. This analysis is case by case and is specific to each debtor and the amount of equity you have in your home however, we can give you an answer very quickly as to whether you would qualify for this relief.
Recommended Reading: Bankruptcy Petition Preparer
What Is A Personal Judgment For Outstanding Debts
A personal judgment is an order from a court establishing that you owe a debt to another party. The debt can arise from a collection account, such as a credit card, medical debt, or personal loan. A judgment may also be ordered for a deficiency in a foreclosure action or after a repossession. The deficiency is the amount of money owed to the lender after the collateral is sold, and the sales proceeds are applied to the outstanding debt.
Courts may also issue monetary judgments in cases involving personal injury claims, including DUI accidents, slips & falls, and other accidents. You could have a monetary judgment issued against you in a civil matter, such as a contract dispute.
Bankruptcy Stops A Judgment
Filing a consumer proposal or bankruptcy provides a stay of proceeding which stops most creditor actions for judgment debts including garnishments and can unfreeze a bank account.
There are exceptions. Certain debts are not eligible for discharge in a bankruptcy including debt related to fraud or misrepresentation, court-imposed fines, student debt less than 7 years old, and child support or alimony. Neither a judgment debt or garnishment can be stopped for these debts.
However all other judgment debts can be eliminated through both a bankruptcy and a consumer proposal.
Read more:How to stop a wage garnishment
Does Bankruptcy Clear Lawsuit Debt
Generally speaking, yes. As long as the underlying debt is dischargeable, the lawsuit debt is dischargeable also. If the debt you got sued over was not dischargeable before, itâll still be nondischargeable once itâs reduced to a judgment.
Exceptions for Fraud
If the lawsuit was based on a claim of fraud or other bad acts, the lawsuit debt may not be dischargeable in bankruptcy. If youâre subject to a fraud complaint, your best bet is to get a knowledgeable bankruptcy lawyer to advise you on your best course of action.
What Should You Do About The Summons
If you are served with a summons to appear in court and you are considering filing bankruptcy, you have two options: 1) answer the complaint or 2) do nothing.
1. Answer the ComplaintWhen you are served with a summons, it will contain a time period in which you must file an answer with the court. If you do not file the answer in that time frame, you lose the right to do so, and a default judgment will enter against you.
You can file an answer in which you assert any defenses you may have to the lawsuit as well as any counterclaims you have against the party suing you. Defenses may include the statute of limitations has expired, lack of evidence, or no proof that the creditor actually owns the debt. Failing to file an answer means you waive the right to assert any defenses or counterclaims, and it can be taken by the court as an admission that you owe the debt.
Filing an answer in the lawsuit also gives you more time until a judgment will enter because the court will have to set a new court date for a pretrial conference and allow the parties more time to prepare their cases and request discovery. Therefore, filing an answer can be a good idea if you want more time to look into options, such as bankruptcy or debt settlement.
Filing an answer does cost money, however. Speak with a debt relief attorney at Wink & Wink to understand what fees you may pay for filing an answer in county court.
Also Check: How Many Bankruptcies Has Donald Trump Filed
Understanding How Creditor Lawsuits Work
If you dont pay your credit card bill or some other debt, you can expect your creditor to take you to courtespecially if you owe a significant amount of money. Most creditors must file a lawsuit and get a judgment before taking additional steps to force you to pay what you owe through collection tactics that include emptying your bank account or deducting money from your paycheck.
If the creditor wins the lawsuit, you might be able to get rid of the liability in bankruptcybut not always. Some money judgments arent wiped out in bankruptcy. Also, a creditor can use a money judgment to put a lien on your property, and they arent always easy to get rid of in bankruptcy. So its important to evaluate your optionsand possibly file your bankruptcybefore the court rules against you.
What Happens If You Dont Include A Personal Injury Claim In Your Bankruptcy Petition
If youâve already filed a personal injury claim or you intend to do so, you must disclose this information on your bankruptcy petition. If you know it exists, you have to list the claim, even if you havenât filed a suit or even hired a personal injury lawyer yet. If you donât report this information and later decide to pursue a personal injury case against the at-fault party, the bankruptcy court could report this turn of events, leading your personal injury lawsuit to be dismissed.
Why? Personal injury claims are meant to compensate a victim for the monetary losses they have suffered as a result of the accident in question. If you ask the bankruptcy court to discharge debt you incurred as an injured party, the money youâre awarded from a personal injury suit isnât directly addressing these debts. This is why you have to disclose this information on your bankruptcy petition or youâll risk dismissal of a personal injury claim filed down the road.
Recommended Reading: Trump Declared Bankruptcy
Learn Your Options And Get Debt Relief Now
If you fall behind on your bills, creditors may start calling or sending harassing letters, demanding payment. If this goes on too long, they may file a lawsuit against you to get that money.
Of course, if youre able to pay off your debt, then you can just do so. But if youre not, and your debt grows so high you cant imagine a way out, you may feel out of options and in desperate need of debt settlement as soon as possible.
One option is filing for bankruptcy, which can discharge most of your debt and give you much-needed debt relief.
But what if a creditor sues you to collect the money before youve filed for bankruptcyis it too late, or can filing for bankruptcy help you stop that?
The answer in most cases is yes.
First, lets review the two most common types of personal bankruptcy, Chapter 7 and Chapter 13.
What To Do If A Creditor Obtains A Judgment Against You
This can be a difficult and complicated process to tackle on your own. An experienced bankruptcy lawyer can help you navigate this process.
Your wages and assets are at risk when a civil judgement is filed against you. For your best chance to remove or satisfy a civil judgment filed against you, speak with Milwaukee bankruptcy attorney Steven R. McDonald today. Get yourself out of a financial hole and begin to rebuild your life.
Recommended Reading: How Many Bankruptcies Has Donald Trump Filed
Getting Garnished Bankruptcy Will Stop That Too
Typically it doesnât take long for judgment creditors to ask the court for authorization to garnish your wages. If a bankruptcy filing is already in the works, it usually makes sense to submit your petition to the bankruptcy court before a garnishment starts. Stop it before your employer even hears of it and – more importantly – before any of your wages are garnished.
If the garnishment has already started, bankruptcy law stops it and protects your future wages.
When Debts Escalate To Lawsuits
It is one thing to be behind with a creditor. It is another thing entirely to be faced with a lawsuit filed by a creditor. Presumably, the creditor is pursuing a judgment in court. With a judgment in place, the creditor has more ways to attempt to collect on their debt. These include potential wage garnishment, forced sale of assets, and foreclosure.
In a past article, Is The Sheriff Coming To My House?, we addressed the process by which a creditor can attempt to enforce their judgment once they obtain one in court. However, by filing bankruptcy you will invoke the powerful protection of the Automatic Stay and prevent the creditor from moving forward.
Read Also: How Many Times Did Trump File For Bankruptcy
Can You File Bankruptcy On A Judgement
- Can You File Bankruptcy On A Judgement?
It is never too late to file bankruptcy on a judgment. However, there could be consequences of waiting to file bankruptcy until after you receive a judgment. Whenever you are struggling with debt problems, it can be best to seek advice from a qualified bankruptcy lawyer earlier rather than later.
If You Are Considering Bankruptcy
You need help from an experienced bankruptcy attorney to help you go through the process of getting rid of a judgment through bankruptcy. That way, you will be able to protect your assets and prevent your creditors from putting up lines on your property.
If youre in the Dallas or Fort Worth areas, get in touch with Leinart Law Firm to get started with our experienced team.
Free Bankruptcy Evaluation
Discuss your situation and your options with an experienced bankruptcy lawyer.
Your privacy is important to us. We’ll never share your information.
Schedule a FREE, no-obligation consultation and evaluation today.
Don’t Miss: How Much To File Bankruptcy In Va
Should You File Bankruptcy
The next question that needs to be answered is does it make sense to file bankruptcy or a consumer proposal in order to stop the lawsuit? This may be much more complicated.
If you are like most people that are sued for an unpaid bill, you probably have more than just this one bill that you have fallen behind on. Depending on the total amount that you owe and your personal situation filing for bankruptcy may make sense. Alternatively, a they are certainly worth consideration.
If the debt you are being sued for is your only debt then the decision to file bankruptcy may be more difficult. It is possible for a creditor to make your bankruptcy much more complicated, lengthy and therefore expensive. When there is only one creditor involved this is much more likely.
If you are being threatened with a lawsuit for an unpaid debt then it makes sense for you to contact a bankruptcy trustee to review your situation and options. A trustee is not a lawyer so they cant assist you with the lawsuit, but they can explain the process in greater detail and help you understand how bankruptcy might help you deal with the problem.
Lawsuits Bankruptcy Won’t Stop
Filing for bankruptcy can be very powerful, primarily because of an order called the automatic stay. The stay stops creditors from engaging in debt collecting actions, including pursuing a lawsuit.
However, some lawsuits aren’t affected by a bankruptcy filing. Here are some examples of litigation that you’ll have to continue to address, despite your bankruptcy.
Don’t Miss: How Do You File Bankruptcy In Texas
If Youre Being Sued And File For Bankruptcy
So long as the debt is dischargeable, your personal obligation to repay the debt will be wiped out in a bankruptcy case.
In addition, the lawsuit has to stop while youre in bankruptcy unless the other side gets relief from the automatic stay.
Once the bankruptcy case is over, the personal injury lawsuit against you will pick up where it left off. Your insurance company will still pay out to the extent that youve got coverage, but thats all the other side can possibly get.
Filing For Bankruptcy Before Being Sued
If the debt youre being sued over is the only debt you carry, it may be better to file an answer. Unfortunately, you will still be subjected to court and legal fees that will probably result in a higher overall cost than filing for chapter 7. If you have many outstanding debts and several looming lawsuits, filing for bankruptcy may be the best move. You will still be subject to filing and other legal fees, but once theyre paid you will have removed the vast majority of your debt at once.
Don’t Miss: Toygaroo Company
Filing Bankruptcy When The Car Accident Was Your Fault
If you were recently involved in a car accident that was determined to be your fault, know that many of the debts you may have incurred in the wake of your accident may be discharged in bankruptcy. For example, credit card balances and medical bills are eligible for discharge in a Chapter 7 case.
However, some debts canât be discharged in this way. For example, debt tied to drunk driving and malicious injury accidents generally canât be discharged. If you have a lot of non-dischargeable debt, you may benefit from filing for Chapter 13 bankruptcy instead. Chapter 13 bankruptcy reorganizes all kinds of debt so that it can be paid down per the terms of an affordable 3-5 year repayment plan.