Judgments & Bankruptcy
About Judgments
When you fall behind on your payments to a creditor, the creditor the option to sue you to attempt to recover what you owe. The result of this may be a judgment against you that allows your creditor to levy your bank account, garnish your wages or put a lien on your property. When a lien is placed on your home or other property, the creditor will take payment when that property is sold. For example, if you owe your credit card company $20,000, and they sue you and get a judgment, they can place a $20,000 lien your home. When your house is sold, the credit card company can collect their $20,000 from the proceeds of the home's sale.
How Bankruptcy Can Help
The filing of either a Chapter 7 or Chapter 13 bankruptcy immediately stops any lawsuits from being filed or judgments being entered against you. If a law suit is pending at the time of your bankruptcy filing, it cannot move forward. If a creditor has a judgment against you, its enforcement can go no further. If a creditor has a judgment and is garnishing your wages, the garnishment can be stopped.
Many judgments can be discharged in bankruptcy. For example almost all judgments for credit card debt can be discharged in a Chapter 7 Bankruptcy. On the other hand, if your judgment is for fraud, negligence, personal injury, etc., then bankruptcy usually cannot discharge this debt.
If you are being sued, or even threatened with a lawsuit by one of your creditors, it is important to immediately consult with a qualified bankruptcy attorney before the creditor receives a judgment. Judgments do hurt credit, and if you are considering bankruptcy, it is usually best to to avoid lawsuits and judgments when possible. Filing for bankruptcy can prevent a lawsuit from resulting in a judgment. And, even after a judgment is entered against you, bankruptcy may discharge that judgment. Once there is lien against property, your bankruptcy options are more limited, but bankruptcy can still be very helpful in getting rid of much of the debt. The important point here is to act quickly. The sooner you speak with an attorney, the more options you will have available to you.
