Can You File Bankruptcy On A Judgement
- Bankruptcy
- Can You File Bankruptcy On A Judgement?
It is never too late to file bankruptcy on a judgment. However, there could be consequences of waiting to file bankruptcy until after you receive a judgment. Whenever you are struggling with debt problems, it can be best to seek advice from a qualified bankruptcy lawyer earlier rather than later.
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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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.
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Collection Of Judgments By Creditors
Most judgments begin as lawsuits. If you ignore the lawsuit, the judge may issue a default judgment. Fighting the lawsuit can still result in a judgment against you if you lose the lawsuit.
Once a party has a judgment against you, it can take additional legal action to collect the debt. In some states, judgment creditors may seize property to satisfy the judgment. In other states, judgment creditors are allowed to garnish wages to satisfy the judgment.
The good news is that filing bankruptcy can get rid of the judgment.
How To Get Rid Of Judgments
Most judgments can be discharged by bankruptcy, except for those that are based on fraud. If you think you qualify for bankruptcy, make sure that you consult with a bankruptcy attorney right away to help you file a petition to place an automatic stay on any judgment and actions enforced by your creditors.
There are, however, several ways to get rid of a judgment apart from filing for bankruptcy. One of the most common methods of getting rid of a judgment is to vacate it.
To vacate a judgment, you need to file a motion to ask the judge to vacate the judgment. You also need to tell the judge why you did not respond to any lawsuits raised against you. If you do not receive any notice of the lawsuit, you have 2 years from the date of the judgment to make any motion.
If there is a lawsuit, you have 6 months to respond. If your motion is successful, the judgment is then vacated, and you can contest your case. This gives you more options to resolve or settle the case.
Another strategy that you can do is to satisfy the judgment. This means that you need to settle your judgment and have the creditor file a satisfaction of judgment with the court. Creditors often settle judgments for less than the balance owed by the debtor. Make sure that you obtain a clear written agreement with the creditor.
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What Happens If I Do Nothing
If you do not file an answer, the plaintiff can ask the court for entry of a judgment in the amount stated in the complaint.
If no amount is stated for damages in the complaint, the plaintiff has to put on proof of the amount of damages. Generally, unless you answered the complaint, you cannot participate in the hearing to set the damages.
Once a judgment is entered, the plaintiff can obtain a lien on your assets and can use the services of the sheriff to levy on your bank accounts and garnish your wages .
If all of your assets and income are exempt under the law of your state, and you expect that situation to continue well into the future, you may be able to ignore the suit altogether.
Even after a creditor gets a judgment, you can negotiate with the creditor for the payment of the judgment. Since the creditor incurs expenses and delay in using legal processes to collect a judgment, you can sometimes negotiate a discount on the judgment for voluntary payment.
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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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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.
Should I Answer The Complaint
The law presumes that if you dont answer the complaint, you agree with the contention of the lawsuit.
Consider answering the lawsuit if 1) you have a defense or 2) you want to buy time to consider your options.
Californians can find information about representing themselves in state law matters from the courts legal self help site.
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What Should You Do About The Summons
If you are served with a summons to appear in court and you are considering filing bankruptcy, you have two options: 1) answer the complaint or 2) do nothing.
1. Answer the ComplaintWhen you are served with a summons, it will contain a time period in which you must file an answer with the court. If you do not file the answer in that time frame, you lose the right to do so, and a default judgment will enter against you.
You can file an answer in which you assert any defenses you may have to the lawsuit as well as any counterclaims you have against the party suing you. Defenses may include the statute of limitations has expired, lack of evidence, or no proof that the creditor actually owns the debt. Failing to file an answer means you waive the right to assert any defenses or counterclaims, and it can be taken by the court as an admission that you owe the debt.
Filing an answer in the lawsuit also gives you more time until a judgment will enter because the court will have to set a new court date for a pretrial conference and allow the parties more time to prepare their cases and request discovery. Therefore, filing an answer can be a good idea if you want more time to look into options, such as bankruptcy or debt settlement.
Filing an answer does cost money, however. Speak with a debt relief attorney at Wink & Wink to understand what fees you may pay for filing an answer in county court.
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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If You Are Considering Bankruptcy
You need help from an experienced bankruptcy attorney to help you go through the process of getting rid of a judgment through bankruptcy. That way, you will be able to protect your assets and prevent your creditors from putting up lines on your property.
If youre in the Dallas or Fort Worth areas, get in touch with Leinart Law Firm to get started with our experienced team.
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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.
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Personal Bankruptcy And Court Judgments
Most creditors must file a lawsuit and get a judgment against you before taking additional steps to force you to pay what you owe, such as emptying your bank account or deducting money from your paycheck. So if you allow your credit card payment to lapse for an extended period, you can expect your creditor to up the debt collection ante and take you to courtespecially if you owe a significant amount of money. If the creditor wins the lawsuit, you might be able to get rid of the judgment in bankruptcybut not always. Its important to evaluate your optionsand possibly file your bankruptcybefore the court rules against you.
Its almost always a good idea to file for bankruptcy before litigation ends, if possible.
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.
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Sawin & Shea Indianapolis Bankruptcy Attorneys
Filing for bankruptcy is not the end. Its the beginning of a new financial life for you. The Indiana bankruptcy attorneys at Sawin & Shea can help you get rid of the overwhelming debt and advise you on life after bankruptcy. We are here for you during this life-changing process. Please do not hesitate to call us today at 317-759-1483 or send an email for a free consultation. We are ready to help.
Bankruptcy Can Discharge Deficiency Judgments
Your mortgage lender typically has a lien on your house . If you default on the loan, the lender can sell your house through foreclosure or auction off your car after repossessing it. If the sale doesn’t bring in enough money to pay off the outstanding mortgage or car loan balance, the remaining amount is called a deficiency. Depending on the laws of your state, your lender may be able to sue and obtain a judgment against you for the unpaid deficiency balance.
If your lender gets a deficiency judgment against you, it can enforce the judgment by garnishing your wages, levying your bank accounts, or placing liens on your property. Filing for bankruptcy relief can wipe out your personal liability for a deficiency judgment. How the deficiency judgment will be treated in bankruptcy depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Unless your lender has placed additional liens on your other assets after obtaining the deficiency judgment, the judgment is no different than any of your other general unsecured debts . Your bankruptcy discharge will wipe out your obligation to pay back the deficiency judgment.
However, if the lender placed a lien on any of your properties using the deficiency judgment, Chapter 7 bankruptcy will not automatically remove that lien . In that case, you will have to file a motion and ask the court to avoid the lien.
Chapter 13 Bankruptcy
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Filing For Chapter 7 Bankruptcy Won’t Get Rid Of A Judgment That’s Already On Your Record
Depending on your situation, you may not care. 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. Filing for bankruptcy after receiving a nondischargeable judgment if you have other debt or need time to pay the judgment, filing for bankruptcy might provide relief. A default judgment is a common reason to consider filing for bankruptcy. In fact, in most cases, filing for chapter 7 bankruptcy will discharge civil judgements. This also works if a default judgment has been entered. There are a few select circumstances where a creditor may be able to lift an automatic stay. The simple answer is that, yes, personal injury judgments can be discharged, or eliminated, by filing bankruptcy. Until you are able to do that, do everything you can to frustrate the judgment creditors. If a lawsuit is still pending, the bankruptcy’s automatic stay will prevent it from moving forward. For instance, if you have been found to have committed fraud, then the judgment against you likely cannot be discharged. The chapter you choose will depend on your particular needs. 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.
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?
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