How to File for Bankruptcy Prior to Judgment

Bankruptcy can provide relief from a judgment.

Having a judgment entered against you can affect your personal finances and credit score for several years. In some situations, the judgment can even result in liens being placed on homes, vehicles and bank accounts. If you find yourself facing a lawsuit that could lead to a judgment against you, bankruptcy may be an option to consider. Filing for bankruptcy can help you get relief from debt while avoiding a judgment.

Instructions

1. Talk to a bankruptcy attorney in your area about your specific situation. While bankruptcy does stop all collection activities, the bankruptcy process can sometimes be slow. Gathering documents, deciding what chapter to file and meeting with an attorney takes time. A qualified bankruptcy attorney should be able to stop or delay lawsuits while your bankruptcy case is being prepared.

2. Qualify for a chapter filing. The common bankruptcy options available to individuals are Chapter 7 and Chapter 13. Most petitioners seek relief through Chapter 7 bankruptcy, since this form of bankruptcy discharges all debt after liquidating any qualifying assets. Chapter 13 is the form of bankruptcy most encouraged by courts, since it requires petitioners to pay a portion of all debts. The bankruptcy attorney you choose will use the means test to determine if you have the ability to repay any debt. The means test reviews your income over the last six months and compares it with the state's median income. If you are below the state's median income or do not have enough disposable income to pay your debts over a five-year period, your attorney will probably recommend filing for Chapter 7.

3. Prepare and file a petition. The bankruptcy petition is the official request for bankruptcy relief. It is usually two pages and expresses the petitioner's inability to repay debts. Supporting documents such as pay stubs, tax returns, bank statements and other documents will also be required. The petitioner will also need to include a list of all creditors included in the petition, and the court will use the list to notify creditors that you have filed. The company or individual seeking a judgment must be included in this list. Once they have received notice from the court, they will be required to stop all collection activities, including lawsuits.

4. Attend a hearing with the court's trustee and creditors. After filing, the court will set a hearing date. During this hearing, the trustee will ask you questions about your financial situation and will verify information found in your petition. The creditor previously seeking a judgment does have the right to appear and question you as well, so that they can object to the petition.

5. Wait for a judgment. The court will notify you, your attorney and all creditors of the outcome of the hearing. If the court has decided to approve the bankruptcy petition, the creditor will no longer be able to seek a judgment against you. If the court has dismissed the bankruptcy case, you will have the opportunity to appeal the decision.

References

• U.S. Courts Bankruptcy Basics