Unfortunately, bankruptcies and judgments often go hand in hand. A judgment is essentially the result of a lawsuit a creditor has filed against you, usually after you have not made payments on a debt for many months. Lawsuits and judgments are often the impetus for a debtor to file bankruptcy, as the financial consequences of an enforced judgment can be dire. However, you can typically use the rules of bankruptcy to obtain a permanent injunction against any judgments.
A default judgment means you were sued by a creditor and you did not appear in court to defend yourself. As a result, the court ruled against you and granted your creditor a judgment against you. A judgment is simply a court order validating the claims of your creditor and permitting him to legally collect from you to satisfy a debt. Before the lawsuit, your creditor was only legally entitled to ask you for repayment of the debt, via phone calls, letters or other means. However, a court-ordered judgment allows your creditor to ask for garnishment of your wages, a levy of your bank account or the attachment of your property with a lien.
The automatic stay is the first protection you receive as a debtor when you file bankruptcy. The stay ceases all collection activity until the court can determine whether you are entitled to a bankruptcy discharge. In the meantime, no creditor can contact you about your debt. Even a creditor with a legally valid judgment is not allowed to enforce that judgment for the duration of the automatic stay. If your creditor was already garnishing your wages, for example, that garnishment must stop until the court lifts the automatic stay.
If you get a bankruptcy discharge in your case, you are on your way towards removing the default judgment against you. However, the discharge in and of itself does not end the enforcement of the judgment. While you are legally entitled to protection from the judgment due to your discharge, you must take a further legal step to remove the judgment from court records, particularly if your creditor has attached a lien to your property.
Vacating a Judgment
If you are legally entitled to have the court remove a judgment entered against you, that process is known as vacating a judgment. After you receive your bankruptcy discharge, you must notify the court where your judgment was entered that you have received a bankruptcy discharge and that the judgment should be lifted. Most courts will require you to formally file a "motion to vacate judgment," which may require legal help. However, with the power of the bankruptcy discharge behind you, the court must legally lift your judgment as soon as you file the appropriate paperwork.
- United States Courts: Discharge in Bankruptcy
- Bankruptcy in Brief --- A Service of the Moran Law Group: Lawsuits
- Bankruptcy in Brief --- A Service of the Moran Law Group: Automatic Stay
- California Courts Self-Help Center: Vacate a Default Judgment
- Bankrate.com; Removing Liens Takes More Than Bankruptcy; Justin Harelik; January 2006