Can You File Bankruptcy On A Civil Judgement?

Many individuals find themselves in debt and confront the looming threat of legal action from creditors.

If a creditor successfully sues a debtor, the court issues a judgment empowering the creditor to pursue debt collection through measures like wage garnishment, bank account seizure, or property liens. These actions can severely impact the debtor’s financial stability and credit rating.

Fortunately, there exists a recourse to halt creditor enforcement: bankruptcy filing.Receiving

An infographic of Filing Bankruptcy On A Civil Judgment

Table of Contents

Bankruptcy and judgment lien

Bankruptcy and judgment liens involve how declaring bankruptcy impacts a creditor’s lien on your property stemming from a court judgment.

A lien grants the creditor the right to seize and sell your assets to settle the debt, potentially affecting various possessions like your home, vehicle, bank account, or personal items.

When filing for bankruptcy, the outcome regarding a judgment lien varies based on the bankruptcy type and property type. Consider these potential scenarios:

In Chapter 7 bankruptcy, you might eliminate the judgment lien if it interferes with your exemption.

exemption safeguards a portion of property equity from creditors.

For instance, with a $10,000 home exemption and a $15,000 judgment lien, you could negate $10,000 of the lien and retain your home.

However, the remaining $5,000 debt to the creditor persists unless discharged in bankruptcy.

Under Chapter 13 bankruptcy, you could remove the judgment lien if it lacks any collateral.

Nevertheless, a portion of the underlying debt might still need repayment through your Chapter 13 plan, unless discharged.

Regardless of Chapter 7 or Chapter 13 bankruptcy, you gain protection from the automatic stay.

legal order halts all creditor collection activities, including enforcing judgment liens, during your bankruptcy case. While temporary, the automatic stay doesn’t affect the lien’s validity unless avoided or stripped as outlined above.

How to avoid judgment lien in bankruptcy

A judgment lien represents a creditor’s legal right to your property following a successful lawsuit against you.

This lien can hinder property sales or refinancing while diminishing your equity.

Yet, in bankruptcy, you might be able to eliminate a judgment lien, provided certain conditions are met.

To bypass a judgment lien in bankruptcy, you must fulfill these criteria:

The lien originates from a court-issued money judgment.
You possess equity in the property eligible for exemption, shielding a specific value from creditors.
The lien would impede your exemption if the property were sold.

Should these conditions align, you can petition the bankruptcy court to expunge the judgment lien. A motion, akin to a formal request, is submitted, urging the court to lift the lien from your property.

The process for filing such a motion varies based on your bankruptcy type and local court regulations. Typically, you’ll:

Complete a motion form, appending relevant documents like the judgment copy, property valuation, and exemption and equity calculations.
Serve the motion and hearing notice to the creditor and other relevant parties.
Attend the hearing to present your case and evidence to the judge.
Await the judge’s decision. If approved, the lien will be nullified, relinquishing the creditor’s claim on your property.

How to file bankruptcy on a judgment

A judgment lien represents a creditor’s legal right to your property following a successful lawsuit against you.

This lien can hinder property sales or refinancing while diminishing your equity. Yet, in bankruptcy, you might be able to eliminate a judgment lien, provided certain conditions are met.

To bypass a judgment lien in bankruptcy, you must fulfill these criteria:

The lien originates from a court-issued money judgment.
You possess equity in the property eligible for exemption, shielding a specific value from creditors.
The lien would impede your exemption if the property were sold.

The process for filing such a motion varies based on your bankruptcy type and local court regulations. Typically, you’ll:

Complete a motion form, appending relevant documents like the judgment copy, property valuation, and exemption and equity calculations.
Serve the motion and hearing notice to the creditor and other relevant parties.
Attend the hearing to present your case and evidence to the judge.
Await the judge’s decision. If approved, the lien will be nullified, relinquishing the creditor’s claim on your property.

Bankruptcy and non-dischargeable debt

A discharge, issued by the court, relieves you of personal liability for most debts, but some remain non-dischargeable, necessitating continued payment.

The Bankruptcy Code delineates 19 categories of non-dischargeable debts, with some automatically falling into this category, while others require creditor challenges in bankruptcy court.

Common examples include various taxes, child support, debts from fraud or injury, student loans, fines, and debts incurred post-bankruptcy filing.

The approach to handling non-dischargeable debts hinges on the bankruptcy type.

In Chapter 7 bankruptcy, you remain liable for these debts post-case closure.

In Chapter 13 bankruptcy, non-dischargeable debts may be repaid partially or fully through a repayment plan. Failure to adhere to these terms may prompt creditors to resume collection efforts post-case closure.

While bankruptcy can alleviate dischargeable debts, understanding its implications on non-dischargeable debts is crucial.

Seeking guidance from a knowledgeable bankruptcy attorney is advisable to grasp your options and safeguard your rights and interests.

Bankruptcy and civil court

Bankruptcy intertwining with civil court cases is a multifaceted subject that delves into how filing for bankruptcy can impact legal disputes involving debtors or creditors.

Civil lawsuits, revolving around non-criminal matters like contracts, torts, or property disputes, culminate in court-issued judgments dictating parties’ rights and obligations.

The ramifications of filing for bankruptcy on civil lawsuits vary based on the lawsuit’s type, status, and outcome. Consider these scenarios:

Debtor as Plaintiff: If the debtor initiates the lawsuit, bankruptcy may merge their claim or judgment into the bankruptcy estate under the trustee’s purview. The trustee may choose to pursue, settle, or abandon the lawsuit based on creditors’ interests, necessitating approval to proceed.
Debtor as Defendant: Filing bankruptcy triggers an automatic stay, pausing all collection actions, including civil lawsuits, against the debtor. Plaintiffs must seek relief from this stay to proceed, and they may file a claim in the bankruptcy case for potential payment.
Creditor’s Role: Whether as plaintiff or defendant, creditors face limitations under the automatic stay, hindering them from pursuing or defending lawsuits or judgments. Additionally, a discharge injunction prohibits collection attempts on discharged debts, requiring court permission to proceed.