Does a Bankruptcy Clear Civil Case Judgments?
You might consider using bankruptcy to stop a civil action against you, especially if it involves thousands of dollars, but the law cannot always help. Whether you can discharge a court judgment depends on the type of case related to the judgment and if any property secures the debt. In most cases, you can discharge a judgment.
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Identification
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Bankruptcy courts can only discharge court judgments that do not result from a violation of the law, such as a traffic ticket or sexual harassment case. However, the courts can discharge civil judgments related to strict civil matters, such as a judgment after a credit card company sues you for an unpaid bill or past-due rent, according to Florida attorney Jill McDonald.
Secured Debts
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You cannot include secured debts in bankruptcy. A judgment can attach itself to property and become secured and thus cannot be discharged. For instance, if a lender sues you in court to recover payments for contract work on your home and gets a lien on your home, you cannot discharge the debt because it is secured by your property.
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Considerations
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The law sometimes allow debtors to avoid liens in bankruptcy. For instance, you can avoid a lien if the judgment prevents you from keeping a certain amount of equity in your primary home. You can also lower the value of the judgment to the fair market value of the asset attached to it. On the other hand, a creditor can object to the discharge of a secured judgment if it can prove fraud, such as lying about your income on an application for credit.
Prevention
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If the judgment was entered in the public record before you filed your bankruptcy case, ask your lawyer to file a "Complaint to Avoid a Judgment Lien" to remove it. Consider negotiating with the creditor before filing bankruptcy. Many creditors will settle for much less than the value of the debt you owe because it reduces legal costs. Also, judgments and bankruptcy usually lower your credit rating by more points than a settled debt.
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