A very common question that people ask is if bankruptcy discharge vacates a court judgment. Some judgment, such as a personal judgment, can lead to severe hardship in the life of an individual. In an instance where it’s a judgment seeking payments of debt owed, the individual with the judgment will try to enforce the judgment by going after the debtor’s property or by approaching the court to request a wage garnishment order.
The easiest way to seek relief from a personal judgment is by filing for bankruptcy under Chapter 13 bankruptcy or Chapter 7 bankruptcy of the bankruptcy code. Let’s expatiate further how judgment works and how filing for bankruptcy can help you get rid of a legal judgment that is against you.
How do judgments work?
Filing a Complaint
In most of the states in the United States of America, a party needs to file a complaint to a competent court of jurisdiction seeking relief for a disputed issue. For example, if you have any debt in your medical account or credit card account, the creditor can approach the court to forcefully collect their money. The complaint will be served to you at your house of residence.
Responding to the Complaint
You can respond to a complaint in two ways. The first is to ignore the complaint, but if you do this, then the court will grant the prayers in the complaint. Most of the time, the relief is usually a monetary one.
Apart from what you owe, the court may award other fees such as court cost, interest, and attorney’s fees against you. Thus, you’ll be paying more than your debt.
If you want to respond to the court complaint, you must do so through the official channel, before the stipulated deadline for doing so ends. Generally, most states have a response period deadline of 20 to 30 days. It is highly essential that you respond before the deadline. The deadline for responding to a complaint differs from one state to another; as such, you should find out the deadline for responding to complaints in your state.
Any response done after the expiration period will be term null and void by the court.
After filing your answer
The court will fix a date for hearing the case after you file a reply in court. It is not necessary that you hire the services of an attorney to defend your case, but it’s to your advantage if you do—this is because a bankruptcy attorney has the requisite skills to investigate and argue the matter in court. An attorney also understands the court process and how to counter the evidence of the complainant.
At the hearing of the case, both sides will make known their arguments and should support them with verifiable facts. If the other party wins the case, the judge may ask you to pay the party what you owe them and any additional cost that they may have incurred during the course of getting a court order to enforce repayment. The judgment will be filed and recorded with the clerk of the court.
The court judgment will remain active for the length of time stipulated by state law. In most cases, the law will remain active for a minimum of 10 years. An active judgment from a potentially debt collection lawsuit means that you’re bound by law to pay the debtor the agreed amount till the judgment expires. If you still owe after the period given for the judgment to be active, the creditor can approach the court to renew the judgment in some states.
Collecting a Judgment
The modality for collecting a judgment depends on the state where the judgment is given. For example, a creditor can garnish the wages of the debtor in some states. In some other states, the creditor is given the legal right by the court to seize the debtor’s property and liquidate it to pay off their debt. Before the creditor can seize the debtor’s property, the court must review the property to prove that it is not exempted by state law.
What happens to judgments in Chapter 7 bankruptcy?
Chapter 7 bankruptcy discharges most personal judgments. It is important to note, however, that Chapter 7 bankruptcies can vary from state to state. This means that a Chapter 7 bankruptcy in Oklahoma won’t necessarily look exactly like a Chapter 7 bankruptcy in Arkansas or a Chapter 7 bankruptcy in Mississippi. When filing under a Chapter 7 bankruptcy, you should list all creditors that have a judgment against you. A notice will be sent from the court to each of those judgment holders—they may object to the discharge. However, only a few judgments won’t be discharged by a bankruptcy court. Some examples of some personal judgments that the Chapter 7 bankruptcy court won’t discharge are:
- Student loans
- Criminal penalties and fines
- Restitution for a victim of crime
- Child support or alimony
- Debt owed to the government
- An intentional or malicious injury that on another individual
- Debts from fraud, misrepresentation, and false pretence
Chapter 7 and 13 bankruptcy will discharge judgments for credit card bills, contract breach disputes, personal loans, and business debts. In addition, Chapter 7 bankruptcy is often an affordable option.
What happens to judgments in chapter 13 bankruptcy?
Chapter 13 also has rules that guide which judgment it can discharge, and which it can’t. Chapter 13 bankruptcy does not discharge debts that are termed as priority unsecured debts—this type of debt s must be paid fully via the chapter 13 bankruptcy case. As such, if the judgment is for a priority unsecured debt, the court will structure your Chapter 13 payment plan such that you will pay the debt based on the bankruptcy payment plan.
Any judgment debt that can be discharged by Chapter 13 bankruptcy will not be paid fully. The creditors will only get the same percentage as those offered to those with unsecured debts. After meeting up with your financial obligation, you will then get a bankruptcy discharge.
Releasing lines against the property
Depending on whether the state law permits or not, the creditor may get a judgment to hold a lien against your property—although some properties are usually exempted from such a method of collection, it is not all properties that are exempted from such. If you have such a judgment against you, the unfortunate thing here is that bankruptcy courts don’t have the right to remove a lien created by personal judgment. The easy and only way out of this is by approaching the court to get an order to remove the judgment.
A Chapter 7 bankruptcy may clear judgements, but you may be wondering if that’s the best option for you or whether a bankruptcy alternative is a better choice. The main alternatives are debt settlement, debt management, and Chapter 13 bankruptcy.