Bankruptcy and Judgments: What to Expect
Bankruptcy and judgments are two legal terms that are often associated with financial difficulties. If you’re facing overwhelming debt and have been sued by a creditor, you may be wondering what to expect from the bankruptcy and judgment processes. In this blog post, we’ll explain what happens when you file for bankruptcy in Huntsville, and elsewhere in Alabama, and how it can affect judgments against you.
Bankruptcy and Judgments: An Overview
When you file for bankruptcy, you are seeking relief from your debts. This can be done through either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy involves the liquidation of your assets to pay off creditors, while Chapter 13 bankruptcy involves reorganizing your debts and creating a payment plan to pay off creditors over a period of three to five years.
A judgment, on the other hand, is a court order requiring you to pay a debt owed to a creditor. This can occur when a creditor sues you for unpaid debts, and the court finds in their favor.
What Is a Judgment?
A judgment is a formal decision made by a court ordering you to pay a debt. Once a judgment is entered against you, the creditor can take further legal action to collect the debt, such as wage garnishment or property seizure.
What Happens to Judgments in Bankruptcy?
When you file for bankruptcy, judgments against you are typically addressed through the bankruptcy process. The specific outcome depends on the type of bankruptcy you file and the type of debt involved.
In Chapter 7 bankruptcy, judgments may be discharged if they are for unsecured debts, such as credit card debts or medical bills. However, if the judgment is for a secured debt, such as a mortgage or car loan, the creditor may still have the right to repossess the property securing the debt.
In Chapter 13 bankruptcy, judgments are typically included in the debtor’s repayment plan. The debtor makes payments to the bankruptcy trustee, who then distributes the funds to creditors according to the plan. At the end of the repayment period, any remaining balance on the judgment is typically discharged.
If a judgment is discharged in bankruptcy, you are no longer responsible for paying the debt. Creditors cannot take additional legal action to collect the debt, nor can they garnish wages or seize property.
It’s worth noting that not all judgments can be discharged in bankruptcy. For example, judgments related to fraud, willful or malicious injury, or certain tax debts may not be discharged. When you consult with a bankruptcy lawyer in Anniston, they can let you know if this is a problem in your case or not.
What to Expect When Facing a Judgment
If you’re facing a judgment in Autauga County for example, it’s important to act quickly. Ignoring the judgment or failing to make payments can result in wage garnishment, bank account levies, or even seizure of property. You, or your bankruptcy lawyer in Prattville, may be able to negotiate a payment plan with the creditor or seek legal advice to determine your options.
If a creditor has filed a lawsuit against you, but a judgment has not been entered, filing for bankruptcy may stop the lawsuit from moving forward. Once bankruptcy is filed, an automatic stay goes into effect, which means creditors cannot pursue legal action against you.
Dealing with judgments and bankruptcy can be a complex and challenging process. If you’re considering bankruptcy, it’s important to speak with a qualified bankruptcy attorney to determine whether it’s the right choice for you. They can help you understand the implications of bankruptcy on judgments against you and guide you through the process.
Bankruptcy and judgments can be overwhelming and stressful to deal with. However, bankruptcy can offer a fresh start and financial freedom. It’s important to act quickly when facing a judgment and seek legal advice to determine your options. If you’re struggling with debt and facing legal action, don’t hesitate to seek the help of an experienced bankruptcy attorney in Montgomery and across Alabama. They can walk you through your options and help you take the first steps towards regaining control of your financial situation.
Attorney Steven A. Harris regularly blogs in the areas of family law, bankruptcy, probate, and real estate closings on this website. Mr. Harris tries to provide informative information to the public in easily digestible formats. Hopefully you enjoyed this article and feel free to supply feedback. We appreciate our readers & love to hear from you!