Can a Judgment Be Included in Bankruptcy?
Bankruptcy courts either discharge your debt entirely or supervise its repayment. Most types of debt can be included in both Chapter 7 and Chapter 13 bankruptcies, including court judgments. In fact, many people file for bankruptcy specifically because they are on the losing end of one or more lawsuits and cannot pay their judgments.
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Bankruptcy
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In a Chapter 7 bankruptcy, the courts will discharge most of your debts entirely, giving you a "fresh start" with your finances. In a Chapter 13 bankruptcy, you are required to repay some of your debts in a payment plan that lasts from three to five years. If any balances on your dischargeable debts remain at the end of five years, the judge will discharge them. Qualifying for Chapter 7 or Chapter 13 bankruptcy depends on both your income and the amount of your debt.
Court Judgment
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If someone sues you in court and wins her case, the judge issues a judgment order. This document allows your creditor to attempt to collect money from you. Depending on your state's laws, a judgment creditor may be able to seize your assets, place a lien on your home or garnish your wages.
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Wage Garnishment
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After a creditor wins a judgment against you, it may be able to garnish your wages, though garnishment is illegal in some states. While federal law forbids employers from discriminating against you because of one wage garnishment, your employer can fire you if it has to handle more than one garnishment order. Filing bankruptcy can put a stop to most wage garnishments.
Exceptions
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Neither Chapter 7 nor Chapter 13 bankruptcy can discharge or eliminate certain court judgments. If your debts include alimony/child support, student loan debt, some tax debts, or judgments that resulted from a DUI, you still owe them after bankruptcy. You will also be required to make payments on these debts during your Chapter 13 repayment period.
Chapter 13 Priority
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If you file for Chapter 13 bankruptcy, your bankruptcy trustee will prioritize certain debts in your repayment plan. Child support or alimony must be paid before any other debt.
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