Discharge Turns On Kind Of Debt
Contrary to what some dishonest debt collectors will tell you, judgments are just as dischargeable in bankruptcy as the underlying debt is.
Whether an unsecured;debt can be discharged in bankruptcy looks at;;the nature of the debt, not whether a court has ruled on the merits of the claim.
- Child support is non dischargeable, whether or not there is a judgment.
- Debts incurred by fraud are non dischargeable in bankruptcy, if the creditor can prove fraud to bankruptcy standards.
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.
Where Do Judgments Come From
There are a variety of ways judgments can be rendered against you in response to creditor litigation or other legal actions.
- A confession of judgment is a document in which you acknowledge liability for the debt. Creditors often require you to sign one as a condition of entering a repayment plan, with the understanding that they will use it to secure a judgment if you don’t stick to the plan.
- A judgment by default is the result of you failing to respond to a creditor’s lawsuit.
- A judgment by consent occurs when you respond to a creditor’s suit by accepting responsibility for the debt.
- A judgment after trial occurs when you and your creditor argue your case before a court, and the court finds you liable for the debt.
When you file for bankruptcy, holders of judgments against you are required to stop efforts to collect what you owe them, so any wage garnishments or collections from bank accounts must cease. Any pending lawsuits seeking judgments against you are also suspended, and typically dismissed or withdrawn upon completion of the bankruptcy process.
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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.
Bankruptcy Can Discharge Money Judgments
If you have found yourself in over your head with debt, you might already have lawsuit judgments against you. Creditors commonly file breach of contract claims against debtors over unpaid credit card debt, personal loans, and medical bills.
If you don’t respond to the creditor’s lawsuit and a default judgment is entered against you, or you do respond to the lawsuit and you lose, the court can enter an order against you for the debt you owe and other costs, including attorney and filing fees.
The money judgment may allow your creditor to garnish your wages or bank account, or take your assets in order to collect on the outstanding debt. Many people wonder if filing bankruptcy can get rid of the judgments and stop wage garnishment. Oftentimes, it can, depending on the type of original debt.
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Find Out If You Can Wipe Out A Lawsuit Judgment In Bankruptcy And What Happens If The Creditor Has A Lien Against Some Of Your Property
By Cara O’Neill, Attorney
If a creditor gets a judgment against you and the debt is dischargeable in a Chapter 7 bankruptcy, filing for bankruptcy will wipe out a creditor’s ability to collect. Judgments, however, can create a lien on your property. And liens don’t go away in bankruptcy automatically. So it’s possible to wipe out a judgment in bankruptcy and remain obligated to pay the lien.
Before determining whether you can use bankruptcy to get out from under a judgment entirely, you’ll need to learn:
- the differences between a judgment and a judgment lien
- whether you can erase the debt in bankruptcy
- if you can exempt the property securing the lien, and
- the steps involving lien avoidance in Chapter 7 and Chapter 13.
Lien removal is a tricky area of bankruptcy law that could require professional help. If you’d like to ensure that you protect valuable property to the best of your ability, it’s prudent to seek the advice of a knowledgeable bankruptcy attorney.
For step-by-step guidance through the bankruptcy process, read What You Need to Know to File for Bankruptcy in 2021.
Who’s Filed For Bankruptcy
Almost eight per cent of non-retired Canadians between the ages of 45 and 64;;or more than 480,000 people;;have gone through at least one bankruptcy in their lives. Statistics Canada
In the end, if you’re told that the best solution to your financial woes is a bankruptcy filing, don’t despair. Bankruptcy laws were set up to allow people in dire straits to wipe their slates clean and start fresh.
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Is It Ever Too Late To File A Bankruptcy Case
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. .
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.
What If You Do Nothing
Assuming the underlying debt is wiped out in your Chapter 7 bankruptcy case, the judgment remains nothing more than an empty shell.
The creditor cannot freeze your bank account, seize your wages, or take any further action against you.
However, the judgment may remain;on record as a valid lien against any property you owned at the time your Chapter 7 bankruptcy was filed. The creditor cant do anything with the lien, but it will need to be paid off in the event that you try to sell the property while the judgment is in place.
Under California law, a judgment becomes a lien on land, a house or other building you own only if the judgment creditor files an Abstract of Judgment. In other states such as New York, however, the judgment is automatically a lien against property.
Which Type Of Bankruptcy Chapter Should You Use To Get Rid Of Medical Debt
Before anything else, you need to remember that bankruptcy will leave a significant effect on your credit report, which will last from 7 to 10 years. Its a decision that should not be taken lightly. Chapter 7 and Chapter 13 bankruptcy can help get rid of your medical debt. But the processes involved are different for each type of legal proceeding.
If you dont have a regular or stable income and your assets have little to no equity, a Chapter 7 bankruptcy may be a good option. Theres no cap to the number of debts you need to have. Plus, its a good solution if your goal is to get rid of your medical debt.
Meanwhile, Chapter 13 bankruptcy is best if you didnt qualify for a Chapter 7 bankruptcy. If you have a stable income and there are assets that you dont want to lose, then this option is for you. The court will issue a repayment plan that lets you make affordable payments to your debt, including your medical bills. Once the plan ends, the court will discharge all of your remaining debt.
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Should I File Bankruptcy Before Or After A Judgment
SoloSuit can keep you from having to break open the piggy bank!
Summary: Should you file for bankruptcy before or after you receive a judgment? Filing at the wrong moment can cost you time and money! Read more to find out when to file for bankruptcy. Protect your assets by responding to debt collectors with SoloSuit!
When you have a judgment brought against you on a debt, it’s never too late to file bankruptcy. But there can be consequences if you wait to file bankruptcy after you receive a judgment. Seek advice from a qualified attorney if you consider bankruptcy. Do this sooner rather than later to avoid limiting your options.
Filing for bankruptcy isn’t always the best option for everyone. But if you do decide to file for bankruptcy, you should file before a judgment rather than after!
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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What Are Lawsuits And Judgments
A lawsuit is simply a way for a creditor to get a court to issue an order that says the money is owed to the creditor, and the amount.
The Judgment, in turn, gives the creditor the ability to try to collect the debt by whatever means are allowed pursuant to applicable state law.
In California, this includes wage garnishment, seizing funds in bank accounts, and placing a lien against real estate and other assets.
So, it is obviously best to file a bankruptcy case before a judgment is entered on the lawsuit.
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.
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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.
Bankruptcy May Result In Removing A Judgment Lien Placed Against Home
You can avoid judgment liens on property resulting from creditors judgments when filing Chapter 7 bankruptcy if the lien is on exempt property.
Bankruptcy is a powerful debt relief tool. Not only can you discharge your personal obligation to pay your debts at the end of the bankruptcy case, but in some cases you can also eliminate judgment liens from your property.
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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Why Should You Have A Judgment Removed
When a person files a bankruptcy and he or she has a creditor who has obtained a judgment, the debt underlying the judgment is discharged through the bankruptcy. However, the judgment itself will remain. No creditor can collect upon the judgment, but the judgment still will continue to exist on the county record. The judgment still will be reported to credit bureaus as unreleased. In addition, if a person were to attempt to sell an asset such as a home, the judgment will interfere with the sale of the property. Oftentimes, a title company will refuse to clear the title for a home when the owner has a judgment against them.
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