Which Is Worse Bankruptcy Or Judgment?
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 don’t 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.
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 there’s a way to quickly clear it up. Filing for bankruptcy will discharge you from any personal liabilities including debts that you owe to creditors. However, it’s 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.
Non-dischargeable debts include student loans, child support, spousal obligations, debts owed to the government (fines, court costs, taxes, restitution in criminal cases) and more. As a general rule, it is better to file a bankruptcy case before a judgment is entered. In most cases, if a judgment has been entered or a lawsuit has been filed, it does not change whether you can discharge the debt in the bankruptcy. Creditors can ask the bankruptcy court to make a dischargeable debt become non-dischargeable by filing an adversary proceeding. The types of dischargeable debts that can trigger an adversary proceeding are:
• Fraud used to get money on goods and services
• An injury caused by malicious acts
• Fraud committed while acting as a guardian or trustee
Bankruptcy And Lien Avoidance
Getting a bankruptcy discharge can bring relief, especially if the lien from your creditor can be attached to important assets, like your house. But there is a way for you to get rid of your judgment and this is called lien avoidance. As long as you did not give the creditors consent for the judgment, you can remove the lien on your properties and assets with a chapter 7 bankruptcy. There are some requirements for this direction, which you should discuss in more detail with your bankruptcy lawyer. Please note that it is critical to follow bankruptcy procedures to avoid the lien. You also need to act quickly so that you can claim your property as an exemption in the bankruptcy paperwork and file for a motion with the court. However, take note that if you have more equity than what is available for exemption, your creditor might argue with the court that the lien is valid only up to a certain amount and a lien can be put in place for the equity that is not part of the exemption.
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.
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.
What is a judgment?
A judgment is really just a piece of paper signed by a judge that says you owe a debt. For example, in the event you can’t pay a credit card on time, the bank has no immediate recourse. They can call and write, but they cannot immediately attach your personal assets in satisfaction of what you owe. However, once a judgment has been obtained, the game changes. A creditor then has the green light to use the legal system to try to attach your personal property or garnish your wages in satisfaction of the debt.
How do creditors obtain a judgment?
In order to obtain a judgement, a creditor will usually be required to file a lawsuit seeking payment of past due debts. In the credit card scenario, most borrowers fail to respond to the lawsuit, which allows the bank to win by default. If the borrower never files an answer to the creditor’s complaint, the court will assume the debt is valid and automatically enter judgment for the creditor. Although the process can seem complicated, judgments don’t come falling out of the sky. You must receive notice of a creditor lawsuit in order for a judgment to be entered against you. When a creditor files suit, they must notify you by delivering a summons and a copy of the complaint to your home. The summons will tell you how long you have to respond before a default judgment will be entered against you. If you receive court documents in the mail that you do not understand, it is always best to pick up the phone and call an attorney to make sure that your rights are protected. Creditors are typically more difficult to negotiate with once they have obtained a judgment because their ability to collect is strengthened. A judgement is a matter of public record, often recorded in the county records where you live. One of the truly unfortunate aspects of the recordation of a judgement, is the fact that it will appear on your credit under the “public records” section of the report. Judgements and bankruptcies will both appear under this section of your credit report and both can do significant damage to your FICO score. In addition to telling the story of your financial history, the judgment tells the world that you owe a debt and that your creditors can look to your personal assets in satisfaction. Notice I say “look to your personal assets.” Unless you have property that is considered non-exempt under your state’s exemption laws, even the creditor armed with a judgment will not be able to take anything from you. Debtors who have no property that is vulnerable to creditors are known as judgment proof.
How long do judgements last?
Although this is a function of state law, most recorded judgments last for a period of 10 years, and creditors are often given the opportunity to seek renewal of the judgment prior to its expiration. This means that although you may be broke today, if you win the lottery tomorrow, your creditor can still enforce its judgment against your winnings.
Does bankruptcy eliminate a judgment?
Filing for bankruptcy will discharge your personal liability for debts, including debts that are owed to judgment creditors. However, if a judgment creditor has placed a lien on your property, filing for bankruptcy will not, in and of itself, remove the lien. While the lien cannot attach to property that you acquire after bankruptcy, it can remain as an encumbrance on property that you owned prior to filing for bankruptcy, such as real estate. In some cases, your bankruptcy lawyer may be able to petition the court to have liens that impair an exemption avoided, but judgments are sticky. The best strategy is to take action before they attach. Creditors use judgments to step up their efforts in collecting a debt. Prior to a judgment being entered against you, you will likely receive collection letters, phone calls and eventually a summons in a lawsuit. It is important to take action when you receive documents in the mail that you do not understand, working with an attorney sooner rather than later, can help you protect your credit as well as your assets. If you’re struggling with debt, filing for bankruptcy can be a good way to get your finances back on track. But not everyone needs to start a bankruptcy case right away. Whether you should file for bankruptcy or do nothing will depend on whether you’re vulnerable to creditors. In some cases, doing nothing, at least for now might be the best option. Most creditors need to file and win a money judgment in court before they can take your property. If, however, you don’t have anything that a judgment creditor can collect, you’re “judgment proof.” You won’t need to file for bankruptcy.
Generally, you’re judgment-proof if:
• You don’t have any equity in real estate.
• You don’t own any assets that you can’t protect from creditors. (State exemption statutes prevent you from giving up certain types of property to collection or bankruptcy, such as equity in a home or car, food, or basic living necessities.)
• You aren’t working or have a very low-paying job.
• You receive an income source that’s exempt from creditors, such as Social Security benefits (and, in some states, unemployment other public entitlement benefits).
Not all debts get discharged in bankruptcy. If you’ll still have to pay your most worrisome bills after filing for bankruptcy, then filing probably won’t be good idea. On the other hand, if filing for bankruptcy gets rid of enough debt that you’ll have more money to devote to non-dischargeable debt, bankruptcy might still help. Also, creditors with these types of debt can use collection techniques like wage garnishments or bank levies even without a judgment.
Past due Child Support
A Chapter 7 bankruptcy filing won’t eliminate or reduce child support debt. So filing for Chapter 7 bankruptcy won’t help unless you can free up future income you can use to pay your child support by discharging other debt. A Chapter 13 bankruptcy case, however, can be a better option. You can stop collection actions by entering into a three to five year repayment plan to pay off your past-due support payments in full. Be aware that if you have a hefty outstanding balance, your monthly payment might be steep because you must pay off all of the arrearages in the plan. You’ll still have to continue making your ongoing child support payment, as well.
If you can catch up in Chapter 13 bankruptcy, here are some of the complications you’ll avoid:
• wage garnishment
• loss of unemployment compensation
• jail time
• offsets of federal or state income tax refunds
• passport denial
• offsets of state lottery winnings
• driver’s license suspension
• reduction of workers compensation benefits, or
• reduction of social security or disability benefits.
Past Due Income Taxes
Taxpayers with outstanding tax debts are subject to a levy on assets or other income sources. A levy is a legal seizure of your property to satisfy a debt. Once a levy is in place, it usually remains until you pay off your tax debt. If you owe past-due income taxes and you do nothing, you could face the following:
• losing state or federal tax refunds
• a reduction in social security benefits
• a wage garnishment (depending on the state in which you live), or
• a lien against your real estate.
Understand that a bankruptcy filing won’t eliminate recent tax debts. However, through a Chapter 13 case, you might be able to pay off the tax debt over a period of three to five years.
If you’re in default on your student loans, the lender could result in a:
• wage garnishment
• offset of federal and state income tax refunds
• loss of eligibility for federal aid, including Pell grants
• loss of deferment or forbearance options, or
• reduction in Social Security income.
It’s not easy to discharge student loan debt in bankruptcy. You must prove that paying your loans will cause an undue hardship, which is a tough standard to meet, although not impossible in every situation. If bankruptcy can help you save your home or car, it might be a good choice for you. If you’re behind in your mortgage or car loan payments, you can catch up on those payments through Chapter 13 bankruptcy. You might also be able to get rid of second mortgages or home equity lines of credit or reduce your car loan to the market value of the car. In Chapter 7 bankruptcy, you can’t bring a loan payment current, but if you can get rid of other debts to free up money to pay your mortgage or car loan, it might be worthwhile to file. Keep in mind that to keep a house or car in this chapter, you’ll want to be current on your payment when you file.
Utah Bankruptcy Lawyer
When you need judgment and bankruptcy help in Utah, please all Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506