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.
Personal Injury Judgments And Debt Priority In Bankruptcy
What does low priority mean in a Chapter 7 or Chapter 13 bankruptcy?
The Bankruptcy Code divides debts into priority levels according to the nature of the debt. The priority levels govern the order in which debts are to be paid when funds are distributed by a Chapter 7 Trustee after asset liquidation or transfer avoidance, or in a Chapter 13 bankruptcy payment plan.
At the top of the priority list are the administrative costs of the bankruptcy case: the Trustees own fees and the debtors own attorneys fees.
In a Chapter 7 bankruptcy, the debtors attorney has already been paid by the debtor, and these are never actually paid out. The Chapter 7 Trustee gets a small flat fee paid from the Courts bankruptcy filing-fee, and then a percentage of any funds recovered from the debtors assets or transfers .
In a Chapter 13 bankruptcy, these fees are paid through the Chapter 13 payment plan from the debtors monthly Chapter 13 plan payments in advance of any other creditors, although some plans do allow for certain secured debts to be paid in advance of attorneys fees.
The next priority level classification is secured debts, such as a home mortgage or car loan.
In a Chapter 7 bankruptcy, if the Chapter 7 Trustee were to liquidate a home with a mortgage encumbering its title, the Trustee would, first and foremost, utilize whatever of the sale proceeds are necessary to pay off the mortgage.
Personal injury judgments also lie within this strata.
How Can You Remove Judgment Liens Discharged In Bankruptcy
A successful bankruptcy case generally results in the entry of a discharge order by a Bankruptcy Court eliminating a debtors liability on many debts. This includes a discharge of debts held by creditors who obtained court judgments, such as from the Superior Court of New Jersey. It is common, however, that these creditors judgments still appear as liens against debtors real property in New Jersey long after their bankruptcy case has concluded. This is because Bankruptcy Court discharge orders do not, without further action, remove judgment liens from debtors real property.
So while a bankruptcy discharge prevents a creditor from attempting to collect its debt against a debtor directly, a creditors docketed judgment lien remains secured against a debtors New Jersey real estate. This is because, in New Jersey, once a creditor obtains a judgment, it may docket its judgment on the index maintained by the Clerk of the Superior Court of New Jersey in Trenton, New Jersey. At that point, that judgment becomes a statewide lien on any real estate owned by the debtor in New Jersey. A New Jersey docketed judgment remains in the judgment index for 20 years, and can be renewed by a creditors timely application.
The applicable statute, N.J.S.A. 2A:16-49.1, Application; hearing; order; cancellation and discharge; effect on lien; notice of application; set-off, states as follows:
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Fraudulent Transfer Judgments Under 11 Usc 523
Section 523 excepts from discharge any debt;.;.;.;for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by;.;.;.;false pretenses, a false representation, or actual fraud.
Writing for the majority, Justice Sotomayor explained that the term actual fraud encompasses anything that counts as fraud and is done with wrongful intent.;.;.;. ;Id.; The Court further held that he term actual fraud in § 523 encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation.; Id. at 1586.; This broad reading, she explained, is in line with the historical treatment of fraudulent transfers.; Id. at 1587.
Talk To A Bankruptcy Lawyer About The Best Option
As you can see, bankruptcy can get very complicated, especially when issues like property liens are involved. That’s why it’s best to speak with a local bankruptcy attorney about your options and the steps you should take to best protect your property.
Bankruptcy is not the only debt relief option available to you. The attorney you meet with can explain other courses of action as well.
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Make It Truly Non Dischargeable
Nor, as I said at the top, is it sufficient to get an agreement in writing that the debt will not be dischargeable in bankruptcy. ;That doesnt prove that the conduct in question squares with the bankruptcy definition of a non dischargeable debt.
You need to establish the operative facts, by agreement or in judicial findings of fact, to be spared a trial in bankruptcy court.
If you are alleging non dischargeable fraud, ;youll need facts adding up to the following:
In re Apte,;96 F.3d 1319, 1322 ;;;In re Kirsh,;973 F.2d 1454, 1457 .
Your settlement agreement must then have the defendant admit that he made a representation to induce the behavior; that he knew at the time it was false, etc.
Then you have undisputed facts entitling you to summary judgment in your non dischargeability action.
Image courtesy of Flickr and HeyThereSpaceman.
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.
Written bythe Upsolve Team. Reviewed byAttorney Andrea Wimmer
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.
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Can The Court Deny A Discharge
In some cases, the bankruptcy court will deny a Chapter 7 discharge for a debtors lack of compliance with rules or procedure. For example, if you commit perjury, fail to account for lost assets, destroy records, or hide property to defraud creditors, the court may not discharge your debts, even though they are otherwise dischargeable. Moreover, creditors, the bankruptcy trustee, or the U.S. Trustee can object to your discharge. However, the bankruptcy court has the final say.
Discharges may be denied if you file bankruptcy too frequently within an impermissibly short window of time. For example, if you file successive Chapter 7 cases, you cannot receive a discharge in the second case if it is within eight years of the filing date for your first case. If you file successive Chapter 13 cases, you cannot obtain a second discharge within two years from the date you first filed for Chapter 13 bankruptcy.
When you are filing under two different chapters, the order determines how long you must wait to receive a discharge in the second case. For example, if you file for Chapter 13, you cannot file under Chapter 7 and receive a discharge within six years from the date you filed your Chapter 13 case, with certain exceptions. If you file Chapter 7 and receive a discharge, you cannot receive a second discharge in a Chapter 13 case filed within four years of your Chapter 7 filing.
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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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.
Can I Discharge A Court Judgment In A Bankruptcy
Bankruptcy is an efficient and quick way for Florida residents to wipe out most unsecured debt, like credit card debt or medical debt. But what about court judgments? If you lose a lawsuit, the court will enter judgment against you, which tells you how much money you need to pay to the person who sued you. Generally, you can discharge a court judgment, but there are exceptions.
No Discharge of Unpaid Child or Spousal Support
You might owe thousands of dollars in unpaid child support or alimony, and a judge can enter a judgment against you for your unpaid amounts . Unfortunately, these debts are not dischargeable, so any court judgment based on these debts is likewise not dischargeable. Instead, work on finding ways to save money or, if you have recently lost your job, contact a family law attorney for help modifying your child support or spousal support orders.
No Discharge for Fraud
The government does not want to reward dishonest behavior, so it prohibits you from discharging a court judgment based on fraud. For example, you cannot discharge a court judgment for a lawsuit based on the following:
- You lied to obtain credit, goods or services
- You stole money while serving in a position of trust, such as while serving as a court-appointed guardian
No Discharge for Debts Owed to the Government
The government wants its money, so you cannot use bankruptcy to eliminate certain debts to the government such as:
No Discharge for Judgments for Willful or Malicious Acts
Resource:
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Not All Debts Are Dischargeable
In general, it is best to file a bankruptcy case before a judgment is entered after a lawsuit.; Usually, if a lawsuit has been filed or a judgment has been entered against you, it does not change whether you can discharge that debt in bankruptcy.
But not all debts can be discharged in bankruptcy. ; For example, child support and alimony are not. ;Neither are student loans, debts incurred through fraud, and many others.
Thus there may be a risk of a judge making specific findings of fact that could render your debt non-dischargeable in a bankruptcy case, so you want to be very careful if you are letting a judgment be entered; prior to filing a bankruptcy case.
See more on which debts can be discharged in bankruptcy.
How To Discharge Debt With Bankruptcy In Florida
In most cases, obtaining a discharge will be the primary reason why a borrower files for bankruptcy. If a debt is discharged in bankruptcy, the borrower will be released from all personal liability on the debt. Further, creditors will be restricted from taking any collection action against the debtor for debts discharged in bankruptcy. Creditors will not be allowed to call, sue, send letters, garnish wages, or take any other collection action.
Most unsecured loans are eligible for discharge in bankruptcy. Unsecured loans are debts that dont have collateral. For instance, credit cards, student loans, and medical bills are usually unsecured loans. On the other hand, secured loans give the lender collateral for the loan. For instance,; home mortgages and car loans are typically secured debts.
Not all types of debts are eligible for a discharge in Chapter 7 or Chapter 13 bankruptcy. You should consult with a bankruptcy law firm in Tampa before taking action. An experienced attorney can help get the most out of bankruptcy and obtain the fresh start you need. Bankruptcy law is complex, and the circumstances will depend on the unique facts of each case.
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Avoiding Judgment Liens In Chapter 7
If you file for Chapter 7 bankruptcy, you can get rid of judgment liens on your property through a process called lien avoidance. You can avoid a judgment lien if all of the following three conditions are met:
The lien is the result of a court-issued money judgment. The lien must stem from a judgment a court entered against you in favor of a creditor who sued you for money owed.
You could exempt the property in bankruptcy. Bankruptcy laws allow those who file Chapter 7 to exempt certain property from the bankruptcy estate. For more information about exemptions in bankruptcy, read our Bankruptcy Exemptions topic.
The lien would impair your exemption. If you could have exempted equity in your property but the lien reduces the amount of equity you could have exempted, the exemption is impaired and you can avoid the lien.
Example. Credit Union has a $5,000 judgment lien on Lisa’s car. Credit Union procured the lien by suing Lisa for money she owed and obtaining a judgment against her in court. Lisa’s car is worth $5,000. Lisa is able to exempt the entire value of her car using the motor vehicle exemption and the wildcard exemption available in her state. The lien is avoidable.
Can You File Bankruptcy On A Judgment
Since a judgment can cause so much damage to your credit standing, a lot of people wonder whether theres a way to quickly clear it up.
Many experts will recommend filing for bankruptcy, but does bankruptcy completely clear judgments?
Filing for bankruptcy will discharge you from any personal liabilities including debts that you owe to creditors. However, its important to note that once a judgment been filed and a lien is placed on your property, bankruptcy will not be able to remove that lien.
You can ask your bankruptcy lawyer to petition the court to have some liens on your property voided. But it is best to deal with judgments before they are attached to the property.
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How Does The Debtor Get A Discharge
Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee’s attorney, if any. The debtor and the debtor’s attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.
What If A Judgment Hasnt Been Entered Yet
For some people, being sued triggers a bankruptcy filing, or speeds up a plan to file bankruptcy. Often, that means the bankruptcy case is filed while a lawsuit is in progress, but no judgment has been entered.
In most cases, an automatic stay is triggered as soon as the bankruptcy petition is filed. The automatic stay is an order from the bankruptcy court telling creditors and debt collectors to stop trying to collect. That includes all types of collection activity, from sending threatening letters and calling you to wage garnishment, repossession, and filing lawsuits.
The order is temporary, but generally remains in effect until the bankruptcy discharge has been entered. In some cases, a creditor can ask the court to lift the stay. When a creditor does file a successful motion for relief from the automatic stay, the stay is lifted only as to that creditor. And, itâs usually only for a specific purpose.
The automatic stay interrupts collection effort even if a lawsuit has already been filed. So, if a debt collection suit is in progress when the automatic stay is entered, the case cannot move forward. If a judgment hasnât been entered, the court canât legally move forward unless the stay is lifted.
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