Will Bankruptcy Stop a Judgment?

Filing for bankruptcy can stop a court judgment from occurring.

A judgment occurs when a creditor sues you for unpaid debts and the judge decides the case in favor of the creditor. Filing for bankruptcy can help you stop a judgment from occurring because, as soon as you file for bankruptcy, your creditors are barred from conducting further collection activity.

Significance

When you file your bankruptcy paperwork, an automatic stay goes into effect. This automatic stay protects you from a judgment by prohibiting your creditors from contacting you or attempting to collect debts from you via any means. Even if your creditor already filed a case against you, the automatic stay requires your creditor to drop its lawsuit.

Considerations

The American Bankruptcy Institute notes that, if you had a previously dismissed bankruptcy case in the past year, the automatic stay protects you for a period of 30 days only. If you've had two dismissed bankruptcy cases in the past year, you don't get the benefit of an automatic stay, and filing for bankruptcy does not stop your creditor from filing a lawsuit and seeking a judgment.

Effects

If you file for Chapter 7 bankruptcy, your creditor cannot seek a judgment after your case is discharged since you are no longer legally liable for the debt. A Chapter 13 petition assigns you a repayment plan that allows you to avoid a judgment by repaying your debts over time.

References

• NOLO: How Bankruptcy Stops Your Creditors: The Automatic Stay
• American Bankruptcy Institute: The Automatic Stay and Serial Filings
• United States Courts: Chapter 7
• United States Courts: Chapter 13

Resources

• Santa Clara University Law: Automatic Stay
• Lawyers: Creditors' Legal Rights
• Bankrate: Life After Bankruptcy