Chapter 7 And Pennsylvania Evictions
Chapter 7 was intended for individuals with limited income and assets. Through Chapter 7, a debtor can eliminate most of their unsecured debt in four to five months. When you file a bankruptcy case, a legal wall is created between you and your creditors. Commonly referred to as the automatic stay, this court injunction stops all collection actions against you, including an eviction. However, there are important exceptions, depending on where you are in the eviction process.
If your landlord has not begun eviction proceedings or if the process is in its early stages, Chapter 7 will prohibit any continuing legal action. However, this does not mean you will be able to stay in the property. The stay will last as long as your bankruptcy is active usually about four or five months. While any money you owed the landlord will have been discharged, your landlord will likely file an eviction action as soon as your case is closed. A petition to lift the stay could also be filed with the court before the case is closed.
This does not mean you are without a remedy. You have 30 days from the filing date to pay the money you are behind. If you can do this while continuing to pay your monthly rent, you should be permitted to stay in the property. However, your landlord might still refuse to renew your lease at the end of its term.
Can You File Bankruptcy On A Lawsuit
When a lawsuit is filed against you, it may be exceedingly difficult to stop it. You are essentially left with a few options. For one, you can fight the lawsuit, which means there is a 50/50 chance of winning. You can also choose to settle and pay off the debt. That is, of course, if you have the means to do so. In the case that you do not have the means, you have the option of filing a bankruptcy petition.;
What many people are not aware of is that yes, you are able to file bankruptcy after someone brings a lawsuit against you. Whether you were just served or a judgement has already been entered against you, filing for bankruptcy after a lawsuit is possible.;
What Types Of Civil Lawsuits Will Bankruptcy Stop
Except for family court matters involving domestic support obligations, just about all civil litigation will come to a halt at least temporarily. An order called the automatic stay prohibits creditors from pursuing you during your bankruptcy case .
Who tells the court about the bankruptcy filing? The plaintiff will have the responsibility of informing the court that the stay is in place. From a practical standpoint, it makes sense for you to let the court know about your bankruptcy case, too. If youre represented, your bankruptcy lawyer will likely provide notice to both the plaintiff and the tribunal.
What will happen next? Nothing. Bankruptcy will stop most common collection lawsuits permanently, and the amount sought after by the plaintiff will get wiped out in your bankruptcy.
Youll be off the hook for most other cases, too, unless the creditor does one of the following things:
- convinces the court to lift the automatic stay so that the trial can continue to move forward , or
- files and wins an adversary proceeding alleging the same matter in bankruptcy court.
What are the chances that the creditor will pursue the case? Many times, the creditor wont bother with the caseespecially if the debt wont survive bankruptcy .
Also, pursuing litigation is expensive, and if youre bankrupt, theres probably no money to be had. A rational creditor wont throw good money after bad.
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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.
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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Effect Of Filing Bankruptcy: The Automatic Stay
Most lawsuits filed to collect on debts owed are dischargeable in bankruptcy. This means that filing for bankruptcy, either before the court date or after a judgment has entered, will wipe out the debt for which you are being sued and the judgment itself if it has entered.
Once you file for bankruptcy, you are immediately protected by whats known as the automatic stay. The automatic stay prevents creditors from continuing to try to collect on your debts, and this includes lawsuits. The automatic stay immediately stops lawsuits pending against you and protects you for the length of your bankruptcy. Additionally, creditors are barred from continuing to call you or send letters demanding payment. Financial difficulties are stressful enough, so removing this constant harassment can be a great stress reliever.
If you receive a Chapter 7 bankruptcy discharge, the debt you were being sued for is wiped out and cannot be collected in the future. This is true even if judgment is entered before you file bankruptcy.
In a Chapter 13 bankruptcy, most people end up paying a small fraction of their debts over a three- to five-year repayment period while theyre protected from collection by an automatic stay. Then, they receive a discharge on those debts at the end of their Chapter 13 payment plan.
How Do Judgments Work
In most cases, if you fail to pay on a debt the creditor will file a lawsuit against you. If the court rules in favor of the creditor they receive a judgment which gives them the right to pursue aggressive collection actions against you. These actions might include seizure of assets, liens against secured assets, or forcible bankruptcy.
The good news is there are things you can do to avoid a judgment against you.
First and foremost, the most important thing you can do is to not avoid the problem. If a creditor is taking legal action against you and you assume the problem will go away if you ignore it, youre wrong.
The worst thing you can do is to ignore legal action against you by a creditor because it will result in an automatic judgment. Even if a debt isnt legitimate, youre at risk for facing a judgment if you fail to take action.
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How To Pay Off After A Settlement Is Reached
After both parties agree on an amount, you should request for the agreement in writing, and in that same document, it should be written that once the amount is paid off, the creditor will file a Satisfaction of Judgment. This is a document signed by the creditor that the payment was received. Avoid paying any money unless the written document of final settlement is received from the creditor. Of course, you dont want to be chased and harassed by the creditor after some time again to pay the rest.
What Are Your Options In Dealing With A Judgment Lien
Do not despair. You do have some options to deal with the judgment lien.
First, if you dont want to keep the house, then you dont have to do anything. When the house is foreclosed on by the mortgage company, the lien goes with it .
If you want to keep your house, then there is good news. The Bankruptcy Code allows a debtor to disconnect or remove a judgment lien against a debtors home to the extent that it impairs an exemption to which the debtor would have been entitled in the absence of the lien. What this effectively means is that if the debtor does not have more equity in the home that can be exempted in the bankruptcy from the claims of creditors, then the debtor can have the court enter an order that removes the lien.
Here is are two examples:
Example 1: The house is worth $200K. The first mortgage debt is $150K. That means there is $50K equity in the house. The judgment lien is for $110K. This debtor lives in Washington State and chose the Washington homestead exemption of $125K. Because the debtor can easily exempt the $50K equity in his home , and the $110K judgment lien impairs the exempt equity, the debtor can disconnect/remove the judgment lien from the home.
Should I Respond To The Lawsuit
Whether one should respond to a debt collection lawsuit really depends on the specific facts and circumstances of their case. ;For example, if the debtor in question has very little assets and no job, then they dont need to worry too much about a judgment causing immediate problems.
But if they have real estate or a job, it could cause some temporary discomfort if the creditor pursues a wage garnishment or bank account levy.
If they record a lien against your real estate, that can also be a problem which can usually be remedied in a bankruptcy case, but removing the lien will require additional fees and steps.
In most cases, responding to the lawsuit will buy time necessary to get the bankruptcy case prepared and filed.
And, of course, if you do not actually owe the money, it will give you the opportunity to explain that and prevent the creditor from collecting against you.
What Is Lien Avoidance
Some judgment liens can be eliminated, or avoided in legal lingo, in the course of a bankruptcy. A judgment lien is avoided if it applies to property you claim as exempt from liquidation or forfeiture in your bankruptcy.
In a Chapter 7 bankruptcy, the debtor’s primary vehicle is exempt from liquidation or forfeiture if it’s worth less than your state’s exemption limit. Any judgment lien against an exempted vehicle you own free and clear can be wiped out through bankruptcy.
Note that this is distinct from any claim to the vehicle retained by the issuer of the loan used to purchase it. If you are still paying off a loan on the vehicle, bankruptcy may eliminate your obligation to cover delinquent payments on that loan, but the lender’s right to repossess the vehiclea form of lien that’s not dependent on a court orderstill stands, and you may still lose the vehicle.
In a Chapter 13 bankruptcy, it’s possible to avoid judgment liens against certain real estate holdings by claiming the real estate as exempt from consideration in the bankruptcy process. Doing so can be tricky, however, because it also eliminates any protection you may have against repaying outstanding debt owed on any mortgage on that property. Because of the potential complexity of claiming exemptions under Chapter 13, it’s wise to consult with your lawyer, and perhaps a real estate professional, when considering your options.
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Bankruptcy Cannot Help In Cases Of Child Support Fraud And Criminal Proceedings
There are exceptions, however, to how bankruptcy can help you in a lawsuit. If the lawsuit is to collect a debt that is NOT dischargeable in bankruptcy , it may be stalled temporarily by the automatic stay when you file bankruptcy. However, the lawsuit may continue and the creditor may collect on a judgment after bankruptcy if the debt is not discharged in bankruptcy. Additionally, if the case is a criminal court proceeding, then the lawsuit will be allowed to continue and the automatic stay will likely not apply.
Speak With A Denver Bankruptcy Law Firm Today
Being sued is stressful and can result in your property being seized out from under you, but in most cases bankruptcy can help. This is because bankruptcy can wipe out your liability for the debt and stop any further collection against you, regardless of whether you have been sued already or whether there is a judgment against you, or even whether your wages are already being garnished.
If you are planning to file for bankruptcy, a lawsuit should not cause any problems, though it may speed up the time frame in which you want to file in order to avoid a garnishment or liens on your property.
In most cases, having a lawsuit filed against you by a creditor means it is a good time to have a free consultation with a bankruptcy attorney to explore all your optionsand the sooner the better. Most people wait too long to find out about bankruptcy protection, and it costs them. If you are served with a summons, its not too late.
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Does Bankruptcy Clear Judgments In 2021
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In a Nutshell
When a creditor or debt collector gets a judgment against you, it’s dischargeable as long as the original debt was dischargeable. The question becomes a bit more complicated if the creditor gets a judgment lien on your property. Hereâs how it works.
Chapter 7 bankruptcy can eliminate many unsecured debts. Some unsecured debt can even be discharged in a Chapter 13 bankruptcy case. But, what happens if credit card debt, medical bills, personal loans, or other unsecured debt is reduced to judgment?
When a creditor or debt buyer files a lawsuit and gets a judgment against you, that generally doesnât change whether the debt is dischargeable. That means some judgment debts are dischargeable and some are nondischargeable. The question becomes a bit more complicated if the creditor gets a judgment lien on your property. But, you may be able to avoid judgment liens in bankruptcy, keep your property, and discharge the debt.
Hereâs how it works.
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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Why A Judgment Lien May Not Be Troubling
A judgment does not last forever. In the event that the judgment is considered a lien against your property, you may not be concerned if you dont intend to sell the property before the judgment expires.
Judgments expire;in;10 years under both California and New York laws. In both states, however, the creditor can apply for an extension of the judgment to get 10 more years to collect the debt.
In addition, if youre in New York you have the option of going back to state court to seek a discharge of the judgment after a certain amount of time has passed since your bankruptcy discharge. Learn more about that here.
If you go through Chapter 7 bankruptcy and have a judgment but dont expect to need to sell your property within the time thats left for enforcement, you may decide to do nothing. Its a decision you need to make with your bankruptcy lawyer.
Does Bankruptcy Clear Judgments
Does bankruptcy stop judgments? Does bankruptcy eliminate judgments? Yes, and yes.
A judgment results when a court rules in favor of a creditor, either because the debtor failed to respond to a lawsuit against him or her or the matter was fully and fairly determined by a judge or jury .
The majority of judgments stem from breach-of-contract actions brought in Texas state court. To learn more about different types of judgments, contact judgment collection attorney in Houston, ;Seth Kretzer. Chapter 7 or Chapter 13 bankruptcy can both clear court judgments, as further discussed below.
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Judgment Liens V Other Secured Debt
A judgment lien is treated differently than some other types of secured debt in bankruptcy. Thatâs because bankruptcy exemptions protect certain property from creditors–even a judgment creditor.
To illustrate, letâs look at two different scenarios involving a lien on a motor vehicle. If you have an outstanding balance on your car loan and the automobile was pledged as security when you purchased the car, bankruptcy doesnât undo that pledge. Bankruptcy may relieve you of personal responsibility for the debt, but the security interest remains. The secured creditor–the lender who provided the purchase money for your car–has a contractual right to take back the car if you donât pay. Under some circumstances, the bankruptcy court may be able to reduce the amount due. But, you canât simply keep the car and discharge the debt.
A judgment lien is different because there was no security contract – you didnât voluntarily grant the creditor a lien. Instead, this type of lien is entered in an attempt to collect a debt. That means exemptions apply, and you may be able to avoid the lien. Imagine that youâve filed using federal exemptions, and that your car is worth $3,000. Your credit card company has a $5,000 judgment against you, and has placed a lien on your car.
The federal exemption protects up to $4,000 in value in a motor vehicle. That means the full value of your car is exempt and the judgment lien can typically be avoided.