Does a credit card judgment affect my bankruptcy?

Credit card lenders and their debt collectors obtain a large number of judgments each year. By obtaining a credit card judgment, the lender gains the ability to use judicial process to sell the borrower's property or seize money out of bank accounts. In North Carolina, a credit card debt, including a credit card judgment, cannot be ordinarily collected by way of wage garnishment. The lender with a judgment can attempt to collect for 10 years or more.

Credit card judgments are rarely an impediment to filing bankruptcy. Judgments themselves are treated the same as the debt they arose under. Most credit cards are unsecured debts that are wiped out by the bankruptcy discharge. The same thing is true for credit card judgments.

Judgment liens (also called judicial liens) are different story, and can survive a bankruptcy. An ordinary North Carolina judgment lien applies to real estate, not personal property such as cars and household goods.

  1. No real estate owned: no judgment lien exists.
  2. Real estate owned, but property exemptions apply: judgment lien exists, but avoiding the judgment lien in bankruptcy may be an option.
  3. Real estate owned, too valuable net equity for exemptions to protect: judgment lien exists. Paying off the lien in chapter 13 bankruptcy may be an option.

The foregoing assumes the creditor has a judgment entered in or transcribed into the county where the real property sits. For example, a judgment in Wake County is not a lien on real estate in Johnston County unless and until the judgment is transcribed into the Johnston County records.

Oftentimes, when a husband and wife own real estate together in North Carolina, they own it in something known as a tenancy by the entirety. If this special form of property ownership applies, a judgment entered against only one spouse is not effective as a judgment lien against the tenancy by the entirety property. Many credit card accounts are established only in the name of one spouse.

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