What Happens to a Default Judgment Against Me If I File for Bankruptcy?
Were you recently the defendant in a civil lawsuit filed against you by a creditor or a debt collector? If so, and if the creditor or debt collector won the lawsuit against you, they will now have what is known as a judgment against you. In some civil lawsuits for debt collection, if the debtor does formally reply to the case against them or does not appear in court, the judge can enter a default judgment. This term does not refer to the debtor being in default on loans or credit, but rather to the fact that the debtor did not present their case in response to being sued, and thus a judgment by default was entered. If the debtor does respond and/or appear but loses the case, they will still have a judgment against them.
The effect of either type of judgment is the same — it allows the creditor or debt collector to take additional steps in order to recover the money they are owed. Common steps include garnishing the debtor’s wages or bank account, or placing a lien on the debtor’s known property. What happens to this type of judgment, or to subsequent garnishes or liens, if the debtor files for bankruptcy?
Automatic Stay Will Initially Stop Any Additional Actions That Could Otherwise Arise Out of the Judgment
As soon as you file for bankruptcy, the automatic stay — an injunction — will immediately halt any creditor or debt collector collection actions against you. This includes any garnishments. It also prevents the creditor or debt collector from initiating a garnishment, for example, based on their judgment.
Bankruptcy Can Result in a Discharge of the Underlying Debt
In your bankruptcy case, the debt you owe — and for which there is a judgment against you — can be discharged if it is an eligible debt. Once a discharge occurs, you are no longer liable for the debt, and any garnishments would also disappear.
What about a judgment lien? If the creditor or debt collector obtained a judgment lien that is currently attached to one of your assets, you can also have the bankruptcy court remove the lien if you can show that the property secured by the lien is eligible for one of Florida’s bankruptcy exemptions.
Contact a West Palm Beach Bankruptcy Attorney to Discuss Any Existing Judgments Against You and How a Consumer Bankruptcy Filing in Florida Can Help
If a creditor or debt collector recently sued you in a civil lawsuit and obtained a judgment against you, you may be concerned about the creditor or debt collector moving forward with a wage garnishment or bank garnishment, or a lien on any real property you own. As we discussed above, filing for personal bankruptcy will typically result in a discharge of the underlying debt for which you have a judgment against you, which means that you will not be liable for the debt, and the creditor or debt collector will be unable to take any action to obtain that debt. It is important, however, to discuss the specific details of the judgment against you — including the specific details concerning the type of debt and any actions that the creditor or debt collector has taken after securing the judgment — in order to have a clear understanding of the benefits of a bankruptcy filing. Contact the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC today to learn more.
Source:
law.cornell.edu/uscode/text/11
