Discover How Wisconsin Address Judgments in Bankruptcy!
Can judgments be included in bankruptcy? What will happen to my lawsuit judgments? Can I file bankruptcy on a judgment? These are just some of the most frequently asked questions in our law firm. The truth is, bankruptcy is a complicated procedure. Even if you filed for bankruptcy before, everything would seem foreign.
Stuck in debt? Bankruptcy laws are like a rulebook to help people and businesses in this situation. These are federal laws, meaning they apply nationwide, not by state. If you owe more money than you can ever repay, bankruptcy can give you a clean slate. There are two main ways bankruptcy can work.
Short Summary
- Bankruptcy is a legal process governed by federal law that helps people and businesses in overwhelming debt. There are two main ways it works: selling assets to pay off debt (liquidation) or creating a repayment plan.
- Filing for bankruptcy can also stop creditors’ collection activities through a court order called an automatic stay.
- Judgments can be included in bankruptcy, but liens may remain. Bankruptcy can eliminate your debt, but it might not remove a lien placed on your property by a judgment.
- A money judgment from a lawsuit can allow creditors to claim your property through a lien. This lien makes it harder to discharge the debt in bankruptcy. To avoid this, it’s best to file for bankruptcy before the creditor files the lien paperwork.
- Chapter 7 can eliminate most judgment debts without liens. If you have no liens on your property, Chapter 7 can erase most judgment debts entirely.
- For non-dischargeable debts (like certain taxes), bankruptcy may not be helpful unless you have other debts or want to create a repayment plan (Chapter 13).
What is Bankruptcy?
Before answering the question “can judgments be included in bankruptcy?”, it is essential that we understand the general concept of bankruptcy. Stuck in debt? Bankruptcy laws are like a rulebook to help people and businesses in this situation. These are federal laws, meaning they apply nationwide, not by state. If you owe more money than you can ever repay, bankruptcy can give you a clean slate. There are two main ways bankruptcy can work:
- Selling your belongings (liquidation): The court might sell some of your things to pay off what you owe.
- Creating a repayment plan: You can set up a plan to pay back your debts over time.
How Can Bankruptcy Stop Creditors’ Collection Activities?
If you owe money and a creditor takes you to court, you could end up with a money judgment against you. This means the court says you owe the creditor money, plus extra fees for their court case.
If the court rules against you or you don’t respond to the lawsuit, this judgment allows the creditor to collect their money in several ways, depending on your state’s laws. Here are some things they might be able to do:
- Take money directly from your paycheck (wage garnishment)
- Take money from your bank account (bank account garnishment)
- Take and sell your belongings (seize and sell personal property)
- Put a claim on your house or land (lien) and potentially take and sell it (seize and sell real property)
When you file for bankruptcy, something called an automatic stay kicks in right away. This is like a court order telling the creditor to stop all those collection efforts we mentioned above. So, filing for bankruptcy can give you a break from debt collectors.
Common FAQs on the Basics of Lawsuit Judgments and Bankruptcy
Winning a lawsuit gives a creditor more power to collect your debt. But filing for bankruptcy doesn’t always wipe away that power completely. It can erase the judgment itself, but that doesn’t always mean you’re off the hook for the debt.
Can Judgments Be Included In Bankruptcy?
Yes. A bad judgment can really hurt your credit score. People often wonder if bankruptcy can erase these judgments quickly. People might suggest filing for bankruptcy to get rid of debt. Bankruptcy can eliminate your personal responsibility to pay most debts.
But beware of liens! Even if bankruptcy erases your debt, it might not remove a lien placed on your property by a judgment. This means they could still take your stuff to pay off the debt.
How Does Bankruptcy Wave Its Magic Wand Over Lawsuits and Money Judgments?
If a creditor wins a lawsuit for money you owe, they can get a court order (judgment) to force you to pay. This judgment can also give them a claim on your property, called a lien. The exact steps to place a lien depend on your state:
- In some states, the judgment automatically gives the creditor a lien on your stuff.
- In other states, the creditor needs to file paperwork with the county office to create the lien.
If you’re thinking about bankruptcy, it’s important to act before the creditor files paperwork to create a lien on your property. Once the lien is there, it’s like they have a special right to your stuff, similar to a car loan or mortgage, but for more things. A judgment lien can cover almost everything you own.
What Happens to Judgments and Liens When Bankruptcy Strikes?
Let’s say the court ruled against you and ordered you to pay the creditor (money judgment). Here’s how bankruptcy might help, depending on the situation:
- Simple case (Chapter 7): If the debt is something bankruptcy can erase (like a credit card bill) and there’s no lien on your stuff, Chapter 7 can wipe it all away. You wouldn’t owe a dime! Even if there’s a lien on your stuff, Chapter 7 might still help, but it’s more complicated.
- Fraudulent debt: If the debt involves fraud, bankruptcy might help you out, but it depends.
- Non-erasable debt: If the debt can’t be erased in bankruptcy (like some taxes), filing probably wouldn’t make sense unless you have other debts or want to pay this one over time (Chapter 13).
File Bankruptcy Today!
Stuck in debt? Bankruptcy can be a way out, but the rules can be confusing. That complexity might have stopped you from filing. Don’t worry, you’re not alone! An experienced bankruptcy lawyer can help you deal with your debts and judgments through bankruptcy.
If you’re facing financial hardship in Wisconsin and considering bankruptcy, Miller & Miller Law can help. Our local attorneys understand the challenges you face and will work closely with you throughout the process. We take our role as bankruptcy lawyers seriously. Strongly committed to serving the communities that make up southeastern and mid-state Wisconsin, our attorneys are ready to help you explore your debt relief options.
Helping our clients resolve their financial issues since 1993, we want to put our experience to work for you. Get a free case evaluation today!
