Can You File Bankruptcy on a Judgment?
If you have a credit card that has been unpaid for a couple of months, the creditor may sue you for the balance. If the creditor wins the case the court will issue a judgment against you. This forces you to pay what you owe. If you file for bankruptcy protection, however, all creditors must respect the "automatic stay" that prevents them from continuing collection activities. If a judgment has been ordered, payments will cease.
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Chapter 7 Bankruptcy
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A Chapter 7 bankruptcy discharges your unsecured debt and gives you a fresh start. You are no longer obligated to pay your unsecured creditors, including judgments.
Assets
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You may keep certain property according to applicable state law, but some possessions may be sold to pay your debts. If money is available from the sale, the judgment creditor may receive a share to satisfy the debt.
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Chapter 13 Bankruptcy
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Chapter 13 is a wage earner plan. You will be responsible for making payments to repay your creditors based on your disposable income. The judgment becomes null but you do pay a percentage of the debt owed.
Contesting
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The judgment creditor may review the pleadings and disclosures of your case and contest the bankruptcy. If the creditor succeeds in getting your bankruptcy dismissed you will again owe the full debt.
Secured Debt
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A judgment on a home is considered a secured debt. You must pay off the lien before you can profit from the sale of your home.
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References
- Photo Credit yomanimus: Flickr.com
