How Does Bankruptcy Affect a Judgment?

A judgement is the end result of a creditor filing suit against you to collect on money that they are owed. It is a court order that allows the creditor to collect their money by garnishing your wages, taking funds from your bank accounts, or obtaining a lien against your home, vehicles, or other property. A lien allows them to take possession and sell the asset to satisfy the debt.

Creditors pursue judgments in court for a variety of debts, including to resolve personal injury or small claims, though most judgments are issued to credit card companies and other lenders.  In many cases, even people who are holding these judgments against you will be unable to have their judgment fulfilled after you’ve successful filed for bankruptcy. Whether this is the case will depend upon the type of debt the judgment was issued for.

When you file for bankruptcy, and particularly for Chapter 7 bankruptcy, you are seeking discharge of your debts, whether a judgment has been issued for it or not. Not every type of debt is forgiven in a bankruptcy discharge. While bankruptcy can eliminate credit card debt, personal loans, medical debts, and overdue rent, debtors are still responsible for payments for high priority debts including child support and alimony, criminal fines, mortgages that entitle the lender to seize mortgage property to recoup financial losses, or debts incurred as a result of criminal acts, fraud, or negligence.  Bankruptcy also won’t discharge debts for court fees, generally for student loans, or for unpaid taxes.

If a creditor holds a judgment against you for a dischargeable debt, then filing for bankruptcy will eliminate that debt, but the judgment is for a non-dischargeable debt then you will still be responsible for it. If a judgment lien has been issued for property that you have claimed as exempt from liquidation or forfeiture, then that judgment will also be eliminated.

It is notable that when someone is successful in having a judgment filed against you, it will not appear on your credit report in the same way that your bankruptcy filing or unpaid debts do. But facing the financial impact of a judgment can still be stressful, and good reason for investigating whether bankruptcy is right for you. For more information on how a bankruptcy filing will impact each of your debts, contact our experienced bankruptcy firm today.