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.
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.
Will Filing For Bankruptcy Stop A Civil Lawsuit Or Get Rid Of A Court Judgment
Filing for bankruptcy will stop some civil lawsuits in their tracks, which can be great if youre facing uncomfortable discovery, like testifying at a deposition. But filing earlier rather than later has other benefits, too. Its much easier to take care of a debt in bankruptcy before you lose a lawsuit and receive a money judgment.
Even so, if you already have a judgment against you, filing for bankruptcy can still help. In this article, youll learn what bankruptcy can do to help with civil lawsuits and judgments.
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.
How Bankruptcy Stops Collection Actions Against You
If a creditor decides to sue you for the debt you owe them, the court;will enter a judgment against you for the amount of the debt, attorneys fees, and other costs. The creditor may be able to use the judgment to garnish your wages or your bank account, or even attempt to seize your property.
When you file for bankruptcy, however, the court orders an automatic stay, which prohibits;such collection actions. And after you finish a Chapter 7 or Chapter 13, you will likely be able to eliminate the creditors right to collect.
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How Are Judgments Treated Differently In Bankruptcy
While;you may be able to wipe out debt underlying a judgment if it qualifies as;dischargeable;debt, you;may still not be in the clear.
The judgment may provide the creditor with a lien on your property that gives them rights to it. These rights allow the creditor to be paid from the proceeds when you sell the property. They also cover all the property you own.
The bad news is a judgment lien can survive bankruptcy and make selling or refinancing your property difficult. The good news is that you can file a motion to remove the lien through bankruptcy.
If You Are The Administrator Of A Deceased Estate
If you are the administrator of the deceased individual’s 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 don’t nominate a trustee, we choose one for you.
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What Personal Property Can Be Seized In A Judgment
Sometimes clients want to know if their tangible personal property can be seized to collect a judgment in Florida. A judgment creditor can try to seize a debtors home furnishings. A creditor must direct the sheriff to seize specific items of personal property, and therefore, a creditor cannot get a blanket attachment against all the stuff in the debtors house. Creditors cannot break into a debtors house and grab property without court permission.
If the creditor identifies non-exempt assets within the debtors house, a court may issue a break order to assist the sheriffs seizure of these assets. Some courts will issue break orders without advance warning to the debtor. Floridas homestead exemptions do not shield the debtors tangible personal property held inside the homestead from seizure.
How Long Does A Judgment Last In Florida
In Florida,;a judgment lasts for 20 years. The time period runs from the day the judgment is signed by the judge and entered by the court. This 20-year timeline is established by;section 55.081 of the Florida Statutes. While a judgment can be renewed in Florida for an additional 20 years using a procedure called an action on a judgment, this is uncommon. The 20 year timeline means that a creditor can collect on the judgment at any time during the 20 years after its issuance.
People commonly misunderstand the difference between how long a judgment lasts and how long a judgment lien lasts in Florida. A;judgment;is an order entered by the court making the debtor liable to the creditor for the debt. A;judgment lien;is the recording of a monetary judgment with the Florida Secretary of State, giving the holder of that judgment priority in collection for any property owned by the judgment debtor. The priority is against any other judgment creditors that subsequently record their own judgments.
While;a judgment;is good for 20 years in Florida,;a judgment lien;is valid for only 10 years.;Once the 10 years of the judgment lien expires, the judgment creditor loses priority against other creditors, but still has a valid judgment for the remainder of the 20 year lifetime of the judgment.
If a judgment originates out of state and is domesticated in Florida, then the timeline begins on the day the judgment is entered by the original court.
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Tips For Collecting Your Judgment
Here are some tips to help you collect your judgment:
Do not use illegal ways to collect your moneyThe debtor may be protected from abusive or unfair ways to collect the debt. And generally, it is not a good idea for you to use unfair or deceitful tactics to get the money the debtor owes you.
In your efforts to collect the debt:
- Do not lie or make misleading statements to collect a debt;
- Do not harass the debtor;
- Do not ask another person for more than basic information about where the debtor is;
- Do not tell the debtor’s employer or other people that the debtor owes you money ;
- Do not call the debtor before 8:00 a.m. or after 9:00 p.m. or at any time or place that is not convenient for the debtor;
- Do not threaten to hurt the debtor or the debtor’s family, property ,or reputation; or
- Do not suggest the debtor will face criminal charges or that the debtor’s property will be taken .
Encourage the debtor to pay you voluntarilyIf you are too aggressive in collecting your judgment, the debtor may file for bankruptcy. This means you would have to file a claim in federal bankruptcy court. Because small claims are $7,500 or less, most small claims debtors can make payments over time.; Try to work out a payment plan with the debtor.
Ask the court for helpIf the debtor does not pay you, the court can also issue documents and make other orders allowing you to:
Talk To A Bankruptcy Lawyer
Need professional help? Start here.
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What Is A Discharge In Bankruptcy
A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.
Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
B Alternatively Excusable Neglect Also Allows The Default To Be Set Aside
Under Rule 60, a court may set aside a default judgment for excusable neglect. he three disjunctive factors used to determine if excusable neglect could permit setting aside the default : whether the party seeking to set aside the default engaged in culpable conduct that led to the default; whether it had no meritorious defense; or whether reopening the default judgment would prejudice the other party. United States v. Aguilar, 782 F.3d 1101, 1105 .
Here, first, the party seeking to set aside the default did not engage in culpable conduct that led to the default. Rather, the declaration of the defendant sets forth that the defendant .
Second, the defendant has numerous meritorious defenses, as set forth in the heading below.
Third, there is no default judgment to be reopened that would prejudice the other party. Rather, no default judgment has been entered.
This Court is empowered to hear this adversary on the merits. Defendant respectfully requests that this Court set aside the default.
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Can You Exempt The Property In Bankruptcy
When you file for bankruptcy, you’re allowed to keep or “exempt” a certain amount of property. If the judgment lien gets in the way of this right, the court will likely agree to avoid it so that you maintain clear property ownership. If you aren’t entitled to exempt the asset, or if the lien is another typesuch as a voluntary lien given when purchasing a house or carthe lien will remain in place.
Example 1. Henry can exempt $5,000 in equity in a car. His vehicle is worth $4,000, allowing him to protect it in a Chapter 7 bankruptcy. However, in his state, a creditor with a judgment automatically gets a lien against all of the debtor’s personal property, including a car . His attorney files a motion asking the court to avoid the lien. Because Henry can entirely exempt the vehicle, the court agrees.
Example 2. Tiffany’s credit card company obtained a judgment for $25,000 and filed it with the Stoney County recorder’s office, giving the credit card company a lien on all of Tiffany’s real estate in the county. An exemption doesn’t cover Tiffany’s cabin. Even though she can wipe out the credit card debt in a Chapter 7 bankruptcy because the property is nonexempt , the court won’t remove the lien. After the bankruptcy, the credit card company can sell the cabin and recover the lien amount.
For more details, see What Happens to Liens in Chapter 7 Bankruptcy?
Identity Of The Creditor
The Bankruptcy Code states that the debt must be owed to a former spouse or child to qualify as a support obligation; attorney fees owed to the other spouses lawyer and not the spouse usually won’t qualify. However, if one spouse was ordered to pay the other spouse’s attorney fees in a support proceeding, the obligation may be considered in the nature of support. The bankruptcy court will look at the circumstances of a particular case when making a determination.
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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.
Nondischargeable Debt And Judgments
The general rule for nondischargeable debts is the flipside of whatâs described above. Dischargeable debt stays dischargeable when reduced to judgment. Nondischargeable debt remains nondischargeable.
For example, a judgment for unpaid child support, alimony, or student loan debt generally wonât be cleared in Chapter 7 bankruptcy. Thatâs because most student loans and domestic support obligations are nondischargeable under the U.S. Bankruptcy Code. Certain other types of debts are also nondischargeable, including some tax debt, debt resulting from embezzlement and certain other financial crimes, and debt relating to injuries caused while operating a vehicle under the influence.
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May The Debtor Pay A Discharged Debt After The Bankruptcy Case Has Been Concluded
A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor’s reputation is important, such as a family doctor.
Can You File Bankruptcy On Court Judgments
In many cases, you can file bankruptcy on a court judgment and be released from liability for the debt. We will cover the different scenarios in this article.
That said, your judgment may be discharged, but you may not qualify for Chapter 7 bankruptcy. You can use the free bankruptcy calculator below to estimate cost and qualification, using the official US bankruptcy forms.
How Defendants May Use Bankruptcy To Avoid Paying Judgments
Defendants in personal injury lawsuits can end up owing the plaintiff a significant amount of compensation, whether as part of a settlement or as a consequence of a court judgment. In simplified terms, the successful plaintiff becomes a creditor of the defendant. One concerns that successful plaintiffs may have is that defendants may seek to reduce or eliminate their debt obligation by discharging it through personal bankruptcy. There are several kinds of bankruptcy, which are named after the applicable chapter of Title 11 of the U.S. Code, also referred to as the U.S. Bankruptcy Code. For individuals, the two forms of bankruptcy are Chapter 7 and Chapter 13. The mechanisms and requirements of these two forms of bankruptcy are quite different.
The GGRM Law Firm has helped injured clients in the Las Vegas area recover compensation for over 50 years. If you have questions about your personal injury case, call us today for a free attorney consultation at or send us a request on our contact page.