Are you considering bankruptcy as a way to get yourself out of debt, but you also have a court judgment against you that needs to be paid? You're likely wondering if the bankruptcy will wipe out that judgment as well. The answer depends on your specific legal situation, which is why it's important to know the following things about bankruptcy and court judgments.
A Bankruptcy Filing Will Not Make A Judgment Debt Automatically Go Away
Be aware that you can list the court judgment in your bankruptcy filing paperwork, but that is not a guarantee that the court judgment is going to be discharged as part of the filing. You still want to list the debt though for the chance that it may be included, since only the debts that you list will be eligible for a discharge. If you don't list it, you can't go back and add the debt later after your bankruptcy has been approved.
A Bankruptcy Filing Enacts An Automatic Stay
One of the benefits of listing the court judgment in a bankruptcy filing is that an automatic stay will be issued, meaning that actions are not allowed to be taken against you to pay those listed debts until the bankruptcy case is approved or denied. This means that you will temporarily be forced to hold off on paying that court judgment, which can give you the time you need to get your finances organized.
A Court Judgment Debt Can Be Discharged or Restructured
There are two main types of bankruptcy proceedings: Chapter 7 and Chapter 13. If the court judgment debt is discharged under Chapter 7 rules, then the debt will be eliminated, and you will not have to pay it back. If you use Chapter 13 laws for your bankruptcy case, then existing debts will be restructured and made part of a payment plan. You'll often pay less than what the fully owed debt would have normally been so that it can fit within your means to pay it, and all debts are consolidated so that you'll make one monthly payment.
A Discharged Debt Cannot Have Action Taken To Collect It
If the debt is officially discharged or restructured, know that the creditor cannot come after you to collect the debt. They are prohibited by law from contacting you regarding the debt that you once owed since you are legally no longer obligated to pay it.
For more information on filing for bankruptcy, contact a bankruptcy attorney in your area.