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You can file for bankruptcy on a judgment. In some cases, that filing will protect you from creditors taking your assets and wages. However, filing bankruptcy will not necessarily eliminate, or discharge, all of the debt you owe, nor will it always cancel out all of the judgment’s effects.
Before filing for bankruptcy, you can speak with a local bankruptcy attorney to review the pros and cons of your legal options. They can help you figure out what to do about a judgment—or, if you contact them early enough, avoid a judgment in the first place.
What Is a Judgment?
It is usually clear that you are in financial trouble well before a civil judgment comes down. A court issues a judgment in response to a lawsuit from your creditors, who have likely tried and failed to get you to pay your debt to them in various ways before taking the matter to court.
When your creditors sue you for unpaid debts, a judge will decide whether that lawsuit has merit. The judge may decide in their favor if:
- You do not respond to the suit, in which case the creditors win by default.
- You tell the judge that you agree the lawsuit is warranted.
- You cannot prove to the judge that your creditors have no good reason for seeking a judgment.
With a judgment in hand, your creditors have permission to take all kinds of actions to get their money back from you. This includes garnishing your wages and obtaining a lien. A lien would allow your creditors to take possession of part of your property to pay down your debt to them.
Bankruptcy and Judgments
The timing of your bankruptcy filing may dictate whether you get to keep all of your property.
If you file for bankruptcy before your creditors acquire a judgment, they can no longer take legal action against you. Your petition requires them to:
- Cease pursuing any pending lawsuits
- Stop asking you to pay back your debt
- Wait until your filing is complete to see what repayment, if any, they can expect from you
If, however, you wait until after a judgment to file your petition, it may be too late to undo the damage that judgment can cause. For example, if your creditors have filed a lien against your assets, that lien would remain in effect even after you file, putting your personal property in danger.
In short, you can file for bankruptcy on a judgment, but your petition may not have the same effect—or provide you with as much breathing room—if you wait that long. The sooner you see an attorney, the more they may be able to do for you.
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When Filing Bankruptcy on a Judgment Does Not Help
Bankruptcy is a lifeline for many people who are struggling with large amounts of debt. However, it cannot discharge all debts. Even after filing your petition, you could still be responsible for paying:
- Student loans
- Child support
- Alimony
- The money you were ordered to pay after being convicted of a criminal offense
- Mortgage and vehicle loan payments
Which debts a court considers non-dischargeable may depend on what chapter of bankruptcy you file. If you have concerns about any particular debt, talk to a bankruptcy lawyer before filing. They could steer you toward the right kind of bankruptcy to meet your needs.
In addition, as noted before, filing bankruptcy does not undo any judgment rendered against you. Your creditors could still lay claim to some or all of your assets.
How to Stop a Judgment
Once a judge hands down a judgment, it is too late to fully stop it. Instead of waiting for that to happen, you can hire a bankruptcy attorney to:
- Negotiate with creditors: A legal professional knows how to approach creditors and negotiate for more time or lower payments. Such adjustments could make it easier for you to pay what you owe.
- Represent you in court: If your creditors file suit (or have already done so), your lawyer could go to court on your behalf and fight for the best possible outcome.
- Come up with a repayment plan: Some types of bankruptcy require you to draft a plan for paying back your creditors over several years. Your lawyer can work with you and your creditors to come up with a viable plan based on your current financial situation.
- Decide which chapter to file for: You can get information on the different kinds of bankruptcies from the U.S. Courts, but this information is general and not tailored to your needs. A lawyer could provide advice specific to your situation.
- Explore bankruptcy alternatives: Bankruptcy is not right for everyone. Your lawyer can talk to you about debt consolidation and other alternatives.
Ideally, you should hire a lawyer early enough to forestall any legal action (such as a lawsuit) from your creditors. The sooner you take action to secure your financial future, the more an attorney may be able to help you get back on your feet.
That said, it is never too late to hire a lawyer to help you with your bankruptcy case. A legal representative can work with you to:
- Reach for the best possible outcome in your case
- Address all of your questions and concerns so that you always understand what is happening and can make intelligent decisions
- Explore all of the pros and cons of bankruptcy versus other viable options
- Examine the judgment (if your creditors already have one) to figure out what it means for you and any assets you own
We Can Help You File for Bankruptcy
While you can file bankruptcy on a judgment—and we may be able to help you do so—it is better to start on bankruptcy filings before your creditors take any legal action. Call Farmer & Morris Law, PLLC, today to learn more about how and when to file for bankruptcy and how to protect your assets when you do so.
