Can I Still File for Bankruptcy if I Have a Judgment on Me?
Judgments are legal decisions signed in court by a judge. They are also called monetary judgments and require you to pay a specific sum for an unpaid debt or other damages. People refusing to pay judgments or make payment arrangements sometimes receive bank or wage garnishments. Wage garnishment allows regular deductions from your paycheck to pay the judgment, while bank garnishment allows regular withdrawals from checking accounts. Bankruptcy is commonly used to eliminate judgments and stop garnishment. It is possible to file for bankruptcy on all types of judgments.
Other People Are Reading
-
The Automatic Stay
-
Bankruptcy includes a powerful legal injunction called an "automatic stay." The automatic stay immediately stops all debt collection efforts, including enforcement of judgments. A judge signs the order once a person files for bankruptcy. The automatic stay is a primary reason why people with judgments file for bankruptcy protection. The stay ends bank and wage garnishment and also ends pre-existing payment plans on judgments. The stay also prohibits the filing of more debt lawsuits while the person is under the protection of the bankruptcy court. Any debt lawsuits currently underway are stopped once the stay is enacted.
Secured vs. Unsecured
-
Money owed on judgments are treated as unsecured debts, the same as credit cards or promissory notes. That makes them different from car loans or mortgages, which are secured loans. A person defaulting on a secured loan loses the collateral. There isn't any collateral to take in an unsecured loan, leaving judgments as the only remedy for creditors if a person defaults on a loan and refuses to pay.
-
Chapter 7 Bankruptcy
-
Chapter 7 bankruptcy eliminates court judgments and other unsecured debts in just several months. That means a person battling several judgments at once could file for bankruptcy and wipe them out completely in a few months. In some cases the $299 Chapter 7 filing fee as of 2011 is all the person has to pay to eliminate the debts. However, the filing fee does not include the cost for an experienced bankruptcy attorney, and not all people qualify for Chapter 7 because of income limits that vary by the state.
Chapter 13 Bankruptcy
-
Chapter 13 bankruptcy works differently than Chapter 7, but is also effective in managing judgments. Chapter 13 requires a payment plan of three to five years, with a goal of paying off the full amount due on judgments and other debts. However, Chapter 13 allows for reasonable living expenses, and money left over is used to pay debts through the court-ordered payment plan. Some people with limited income may pay only a small percentage of judgments and other unsecured debts. Judgment debt remaining after the payment plan is eliminated.
-
