Friday, June 17, 2022
HomePopularDoes Filing Bankruptcy Stop A Judgement

Does Filing Bankruptcy Stop A Judgement

Willful Or Malicious Accidents

Will Filing Bankruptcy Stop a Garnishment?

The other exception is if the accident was the result of a willful or malicious injury caused by you to another entity or to the property of another entity. ;An example of this could be if you deliberately ran your car into your neighbors fence because you hated the sight of the fence or you hated the sight of your neighbor. ;Under this exception, both personal injury and property damage are not dischargeable in bankruptcy.

In both of these instances you would have to pay for the debts.

Whats A Judgment Lien And Why Should I Care

A judgment is a court order. This court order can be turned into a judgment lien that can attach to real estate like your home. The process for this depends on state law. Judgment liens can turn your unsecured debt into a secured debt. A bankruptcy judge can make a judgment lien go away if the only real property you own is covered by an exemption.

Do I Have To File Bankruptcy Before Theres A Judgment

First, remember that it takes weeks or even months from service of the actual lawsuit until the creditor actually has a judgment on which he can execute.

There are time periods prescribed in the law ;of each state which create the absolute minimum time periods required. ;In the real world, most institutional creditors, like credit card companies, dont move these suits forward with much urgency.

In general a debt represented by a judgment is just as dischargeable as the same debt prior to entry of judgment.; Note, however:

  • A judgment;lien that attaches to assets is only avoidable by the debtor if it impairs an;exemption.;;More about exemptions.
  • If the complaint alleged fraud or other grounds that would make a debt non dischargeable in bankruptcy, entry of a judgment against you may prevent you from later contesting the facts .
  • In the case of debts that are;unliquidated ,; a judgment will liquidate the debt:; that may have the effect of increasing your debts beyond the;eligibility requirements of Chapter 13, with its expanded discharge and inexpensive reorganization possibilities.

Read Also: Can You File For Bankruptcy If You Owe The Irs

What Happens To A Judgement If You File For Bankruptcy

What happens to a judgement if you file for bankruptcy

Posted from: Ontario

, Doug Stuive, CA | Trustee | CIRP said:

A judgement is basically a court order that indicates you have an outstanding debt you are required to pay.

Judgements that resulted from regular debts, like old loans, credit cards, civil lawsuits, can be included in a bankruptcy or consumer proposal filing. This would release you from your obligation to pay the judgement.

If you have judgement from a criminal act or from child or spousal support this can not be included in a bankruptcy or consumer proposal.

A bankruptcy filing stays on your record for six years from your date of discharge. After that time period, the bankruptcy and the debt that was part of the bankruptcy are removed from your credit history.

The judgement should also be removed at this time.

If you have a judgement against you that you know you will not be able to pay, consult one of our trusted advisors in Ontario to find out if filing a consumer proposal or a bankruptcy makes sense for your situation. We are here to help.

What If A Judgment Has Already Entered

Does Bankruptcy Stop Foreclosure?

Once a judgment enters against you, the creditor can seek to collect the judgment from either you or your property. The most common ways they do this are: 1) garnishment, 2) levy or attachment of bank accounts, and 3) judgment lien filed on your property.

1. GarnishmentIn Colorado, creditors can collect on a judgment by garnishing up to 20% of your wages. Once a judgment enters, the creditor will serve notice upon your employer, who will then give you notice of the upcoming garnishment. The garnishment will continue until the entire judgment is paid in full, including attorneys fees and other fees for the collection efforts.

If youre already in need of debt relief, taking home even less money each paycheck can be even more painful emotionally and financially. Thankfully, a bankruptcy filing can immediately stop a garnishment.

2. Levy or Attachment of Bank AccountsYour judgment creditor can also collect against money you have in the bank. They do this by serving a notice to your bank. Your bank then seizes the funds and gives you notice and a chance to claim the money exempt under Colorado or Federal law. Some possible exemptions would be social security funds or disability funds.

In some cases, bankruptcy can help you get those funds back if they would be exempt in your bankruptcy case. Speak with a bankruptcy attorney at Denver-based Wink & Wink to learn more about what assets and funds may be exempt when you file for bankruptcy.

Recommended Reading: Are Medical Bills Dischargeable In Bankruptcy

How To Get Rid Of The Judgment Lien In Bankruptcy

Lets say you dont feel comfortable with the lien remaining in place.

If thats the case, youll need to file a motion to avoid the judgment lien in bankruptcy court.

To do so, youll need to prove that the lien is impairing an exemption;to which you are entitled under the bankruptcy laws. You should expect to provide to your lawyer at least all of the following:

  • valuation of the property;
  • balance due on all mortgages, home equity loans, and other liens; and
  • copy of the judgment from the state court.

Judgments That Are Not Dischargeable

Some judgments may not be dischargeable in bankruptcy. If the underlying debt would not be discharged in a bankruptcy case, the judgment is not discharged. For instance, judgments for DUI accident claims are not discharged by bankruptcy.;

Other non-dischargeable debts include domestic support obligations, student loans, restitution, fraud, and most debts owed to the government. You would continue to owe these debts after the bankruptcy case closes unless they are paid in full through a Chapter 13 plan.

A credit can ask the court to lift the automatic stay so that the lawsuit may continue. The court might grant the request if the debt is not dischargeable in bankruptcy. A court may also grant the request if the outcome of the case determines a creditors rights within the bankruptcy case.

Creditors may also file an adversary proceeding without the bankruptcy case. The adversary proceeding is a lawsuit filed within a bankruptcy case. The bankruptcy judge assigned to the bankruptcy case is also assigned to hear the adversary case. Adversary proceedings typically deal with debts that a creditor alleges are non-dischargeable or when the debtor commits fraud or other misconduct.

Don’t Miss: How To Declare Bankruptcy Without A Lawyer

Dischargeable Debt And Judgment Liens

If you have a judgment lien associated with a dischargeable debt and you file for bankruptcy, you’re in luckthe debt will get wiped out. The creditor won’t be able to take action to collect directly from you.

However, it’s important to understand that the debt and the lien created by a judgment are two separate things. While you can eliminate the dischargeable debt, you’ll need to take additional action to remove the lien. Bankruptcy won’t automatically cause the lien attached to your property to disappear.

Why is this a problem? As long as t lien remains in place, the creditor will have an interest in the property it attaches to. The creditor can force a property sale or wait until you sell it and get reimbursed from the proceeds.

If you don’t take action, the judgment will continue to impair your property until it’s paid in full or the judgment expires. The active period for a judgment varies by state. A good average is ten years, often with an option to extend the judgment for an additional ten years.

Does Filing For Bankruptcy Make A Lawsuit Go Away Forever

How Filing Bankruptcy Stops An Eviction

In most cases, a bankruptcy will discharge a lawsuit or judgment because the financial matter is included in your bankruptcy. However, some legal actions will continue regardless of whether you file for bankruptcy. This includes criminal cases, divorces, child custody cases, and child support orders. But you may be able to cope with the costs of these circumstances more easily when you have a manageable bankruptcy plan in place. Contact a bankruptcy attorney to make the right choice for your financial future.

You May Like: Does Declaring Bankruptcy Affect Your Spouse

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.

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.

Also Check: How Does A Bankruptcy Affect Credit Score

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?

Is It Ever Too Late To File A Bankruptcy Case

Bankruptcy Stay Does Not Prevent Creditors from Renewing ...

The short answer is: ;No, it is never too late.

But there can be consequences to waiting.

Most people wait until the last possible moment before considering bankruptcy as an option.

They make decisions and act, or fail to act, without getting all the necessary information.

The longer they wait, the more options disappear and the more problems arise.

As I discussed in my article on When You Should File Bankruptcy, ;it is always better to consider your bankruptcy and non-bankruptcy options earlier, rather than later.

Doing so enables you to minimize the costs and problems, and maximize the benefits of filing a bankruptcy .

However, as long as you are eligible to file under one of the bankruptcy chapters, you can still eliminate or restructure debts that are owed after a lawsuit is filed and even after a judgment has been entered against you.

The fact that there is a lawsuit or judgment does not affect affect your bankruptcy options, unless the judgement had a finding of fraud or other element that is excepted from discharge in bankruptcy .

It is, nevertheless, usually best to file bankruptcy before a judgment is entered. ;Because once that occurs, the creditor can garnish wages or seize bank account funds up until a bankruptcy case is filed.

The creditor can also then place a lien against property, which may or may not be removable in bankruptcy. .

You May Like: Can You Be Denied A Job Because Of Bankruptcy

When A Lawsuit Might Proceed In The Interest Of Justice

A person involved in any lawsuit can ask the bankruptcy court to allow the matter to proceed. The court will probably grant the motion if doing so won’t affect the bankruptcy case, and the moving party will suffer harm otherwise.

The request, which can be made by filing a motion to lift the automatic stay, commonly occurs when:

  • A mortgage lender stands to lose money if forced to wait to pursue foreclosure until after the bankruptcy case closes.
  • The debtor isn’t planning to reaffirm with a car lender and the lender would like to limit its loss by getting the car back through repossession.
  • A landlord has started the eviction process but hasn’t received an eviction order or judgment.
  • A government agency, not wanting to violate the automatic stay, stops pursuing an action until it receives approval from the bankruptcy court to move forward.
  • A creditor asserts that a debt isn’t dischargeable due to fraud and has already spent significant time and money litigating a matter in state court .
  • A creditor has some other compelling reason.

If the creditor fails to make the motion, the automatic stay will remain in place, and the lawsuit won’t be able to move forward until after the bankruptcy case is over. However, if the underlying debt was discharged in the bankruptcy, the lawsuit will go away, as well.

Does It Make Sense To File For Bankruptcy If You Have Criminal Restitution Payments

In the hierarchy of debts that you owe, criminal restitution is the highest. Repaying your criminal restitution is what keeps you out of jail and in your home. Other debts that may be important are your home mortgage and your car payments. If much of your debt is unsecured then it may be worthwhile to discharge it in Chapter 7. If most of your debt is secured, then reorganizing it in Chapter 13 will have several advantages.

Recommended Reading: How Many Times Can You File Bankruptcy In A Year

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.

How Defendants May Use Bankruptcy To Avoid Paying Judgments

Can Bankruptcy Help If I Have A Judgment or Lawsuit Against Me?
  • 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.

    You May Like: Which Statement Regarding Bankruptcy Is Not True

    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.

    RELATED ARTICLES

    Popular Articles