Bankruptcy to Remove Unpaid Judgments
Having a judgment entered against you is a problem, a problem that can linger for years. With a judgment hanging over you, there is a risk when turn around your finances, your creditor will get the benefit. Consumers might have judgments outstanding after a credit card company or service vendor sued on an account, or perhaps after a car lender or mortgage lender sued for an unpaid balance following repossession or foreclosure--a deficiency judgment. Bankruptcy provides strong tools to address problems with unpaid judgments.
A bankruptcy discharge voids most judgments, preventing a creditor from collecting on the judgment in the future. If you own real estate, a judgment lien may also exist, which is not automatically voided. In many cases, judgment liens can be removed or reduced in bankruptcy. A lien could also be paid off over time in chapter 13.
For bankruptcy purposes, the most significant characteristic of a judgment is whether or not it has attached to real property, i.e. become a judgment lien. A judgment entered in a county or transcribed to that county's records becomes a lien on all real property (i.e. land, houses, etc) owned by the judgment debtor (defendant) in that county. Unless affirmative acts are taken to attack the judgment lien in bankruptcy, this lien will remain enforceable against the real property even after bankruptcy. The most common method to remove a judgment lien is to avoid the lien as an impairment of an exemption. Each debtor has certain property allowances that are applicable to real property. If removing the judgment lien would enable the debtor to claim more of the allowance, then lien impairs the exemption and can be removed in whole or part by court order.
Regardless of real estate ownership, the bankruptcy discharge will void most judgments themselves, preventing future collection activity against personal property or future acquired real estate. In essence, if the debt that gave rise to the judgment is discharged, the judgment is voided. For this reason, even debtors who are judgment-proof today may find value in bankruptcy. Why let a judgment hang over head for 10 years?
Are you ready to stop worrying about the judgment you can't pay? Start today with a free bankruptcy evaluation.