Does Bankruptcy Get Rid of Judgments?

If your creditor has obtained a judgment against you to pay outstanding debt, you might be wondering whether bankruptcy gets rid of any judgments against you? We will explain the answer to this question in much detail below.

Does Bankruptcy Get Rid of Judgments?

Whether bankruptcy gets rid of a judgment depends on whether the type of debt underlying the judgment is subject to discharge through bankruptcy. For example, credit card debt, personal loans, overdue bill payments, and private debts to family and friends are eliminated by bankruptcy. However, other types of debt, such as home loans, child support, criminal fines, and alimony judgments are not eliminated by bankruptcy.

So, it really depends on the type of debt for which a judgement against you has been obtained. For those who are not familiar with what a judgment is, a judgment is a court order issued against you from a creditor, ordering you to pay them the money that you owe them.

A creditor who is able to obtain a judgment against you can perform a number of actions to obtain the money that you owe them. Actions a creditor can take include garnishing your wages, taking money directly from your bank account, or obtaining a judgment lien against you personal or real property (real estate, vehicle, personal belongings).

There are many types of judgments and they can be obtained in a variety of civil matters, such as a civil lawsuit where you cause another person injury, small claims lawsuits, and civil lawsuits where you have failed to pay money owed to your creditor.

For example, if you failed to pay your credit card bills, your creditor may sue you to obtain a judgment against you, ordering you to pay them the amount you owe them.

CSP Pro Tip – The nature of the debt underlying the judgment determines whether the debt will be discharged in bankruptcy.

What is a Judgment?

A judgment is a court order, stating that you’re legally responsible for repaying your creditors the money that you borrowed for them. Monetary judgments are common in cases involving creditors, lenders, personal injury, medical malpractice, and breach of contract cases. Typically, when a lender is trying to collect money from you, the type of case involved is a breach of contract. It’s based on the breach of contract between you and your creditor to repay the money owed to them. If the creditor is successful in its suit, the court will provide them with a judgment against you. Read below to explore the different types of judgments that can be had against you.

What Are the Different Types of Judgments That Can Be Obtained Against You?

Here are the different types of common judgments that can be obtained against you:

  1. Default Judgment – If a creditor brings a lawsuit against you and you fail to respond or refuse to respond to the lawsuit against you, your creditor can obtain a judgment against you by default.

  2. Confession of Judgment – If you sign a confession acknowledging liability for the debt, the signed confession can be used against you by the creditor to obtain a judgment against you. Typically, a confession of judgment is a document that’s signed by you when you agree to a repayment plan with your creditor. The confession of a judgment can be used against you in court.

  3. Judgment by Consent – A judgment by consent can be obtained against you by a creditor when you respond to a civil lawsuit against you and accept liability for repayment of the debt your creditor is claiming you owe.

  4. Trial Judgment – A trial judgment is a type of judgment that can be obtained against you when you respond to a civil lawsuit, argue your case before a judge, and the court finds you liable for repayment of the debt.

CSP Pro Tip – Regardless of which type of judgment is obtained against you, whether bankruptcy will get rid of the judgment depends on the debt underlying the judgment. Credit card debt, personal loan debt, and private debts are typically discharged (erased) by Chapter 7 and Chapter 13bankruptcy. Other types of debt, such as child support, alimony, and criminal fines, are not erased or discharged by bankruptcy.

Does Bankruptcy Get Rid of the Following Judgments?

Regardless of how a judgment is obtained against you, the underlying debt determines whether the judgment is discharged in bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy discharge (erase) the following types of judgments against you:

  1. Credit Card Debt
  2. Personal Loans
  3. Overdue Rent Payments
  4. Overdue Bill Payments
  5. Private Debts
  6. Many other unsecured debts

The takeaway here is that even though your creditor obtains a judgment against you, the judgment does not affect the dischargeability of the debt against you. For example, even if a creditor was able to obtain a judgment against you for past due credit card debt, if you successfully discharge your debts, credit card debt would be among the debts discharged.

Now, let’s explore some of the debts that are not discharged in bankruptcy:

  1. Child Support
  2. Alimony
  3. Criminal Fines
  4. Student Loans
  5. Money obtained through fraud, negligence, and other criminal actions

Do Judgments Affect Your Credit?

In the past, judgments did affect your credit as they would show up on your credit report under the public records section. However, judgments no longer appear on your credit report, and therefore they have no impact on your credit score. That said, bankruptcies do appear on your credit reports and they have a significant negative impact on your credit score.

Bankruptcies are among the most negative items that can appear on your credit report, possibly lowering your credit score by more than 150 points. Chapter 7 bankruptcy remains on your credit report for 10 years from the date you filed for bankruptcy, and Chapter 13 bankruptcy appears on your credit report for 7 years from the date you filed for bankruptcy.

As the bankruptcy ages, its impact on your credit score will lessen until it’s ultimately removed from your credit report. That said, so long as a bankruptcy remains on your credit report, it will have a negative effect on your credit score.

That said, since judgments don’t appear on your credit report, they have no effect on your credit scores. However, merely because a judgment does not have a negative impact on your credit score, does not mean that you should ignore it. A judgment can result in your wages being garnished and money being taken out of your bank accounts. Nevertheless, although filing for bankruptcy is a big decision and headache for many, it can eliminate judgments permanently, allowing you to breathe a sigh of relief.

Can You File For Bankruptcy If You Have a Judgment Against You?

Yes, even if there is a judgment against you, you can still file for bankruptcy and have the judgment against you discharge through it. So, even if a creditor sues you and obtains a judgment against you, you can still use bankruptcy to your advantage to have the judgment against you wiped out in bankruptcy.

That said, if your creditor obtains a judgment lien against your property, you may be able to have a judgment lien set aside, however, there is a possibility that you may not be successful in doing so. This is so because judgment lien can survive bankruptcy, making it difficult for you to sell your property.

Nevertheless, some liens can be avoided in an action for bankruptcy. A judgment lien can be avoided if the property your creditor has obtained a lien against is exempt from liquidation or forfeiture. For example, in Chapter 7 bankruptcy, your primary vehicle is exempt from liquidation or forfeiture. So, if your creditor has obtained a lien against your vehicle, the court will likely allow you to avoid the lien, allowing you to own your vehicle free and clear of any liens.

Frequently Asked Questions (FAQs)

1. Do bankruptcies clear judgments?

Bankruptcy can clear certain types of judgments, such as those for credit card debt, personal loan debts, and other forms of unsecured debts. However, there are some types of judgments that bankruptcy cannot clear, such as those for child support, alimony, student loans, and some other more.

2. Should I file for bankruptcy before or after a judgment?

Typically, experts recommend that you file for bankruptcy before a judgment. However, even if a judgment was entered against you, the debts underlying the judgment can still be discharged.

3. What happens after a judgment is entered against you?

After a judgment is entered against you, your creditor may be able to garnish your wages, take money out of your bank accounts, and place liens against your property.

4. Does bankruptcy wipe out all debts?

No, bankruptcy does not wipe out all debt. There are some types of debt that bankruptcy does not discharge.