Can You File Bankruptcy on a Judgment in California?
Judgments can feel like a significant financial burden, leaving many Californians wondering if bankruptcy offers relief. You might be asking: Can you file bankruptcy on a judgment in California?
Yes, you can file bankruptcy on a judgment in California. If the judgment has not been turned into a lien, it is treated as unsecured debt and can be discharged in bankruptcy. If a lien exists, you may be able to remove it through bankruptcy if it impairs an exemption.
With decades of experience helping clients address judgments through bankruptcy, I’ve guided many toward financial relief. Let’s explore how judgments are handled in bankruptcy and what steps you can take to discharge or manage them effectively.
Can Bankruptcy Clear Lawsuit Judgments?
In some cases, it is possible to eliminate a lawsuit judgment, but you should grasp some of the fundamental concepts about bankruptcy filing.
Lawsuit Judgments and Bankruptcy: The Basics
A lawsuit judgment is a court order requiring you to repay a debt to a creditor. It arises after a lawsuit where the creditor sues you for non-payment and wins the case. The judgment specifies the amount owed and empowers the creditor with legal tools to collect the debt, like wage garnishments or bank account levies.
On the other hand, bankruptcy is a legal proceeding designed to provide relief from overwhelming debt. By filing with the US Bankruptcy Court, you can discharge (eliminate) certain debts, preventing creditors from legally pursuing collection efforts.
Bankruptcy Rules and Lawsuit Judgments
The good news is that filing for bankruptcy in California can often discharge most lawsuit judgments. This applies to judgments arising from various forms of unsecured debt, including:
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
However, it’s crucial to understand that dischargeability hinges on the type of debt underlying the judgment.
Discharge Turns on Kind of Debt
California bankruptcy law categorizes debts as either dischargeable or non-dischargeable. Dischargeable debts are eliminated through bankruptcy, while non-dischargeable debts remain even after completion.
Classifying Debt
The type of debt that led to the lawsuit judgment determines its dischargeability. A breakdown is helpful:
- Dischargeable Debts: Most unsecured debts from lawsuits, including those mentioned, are dischargeable in bankruptcy.
- Non-Dischargeable Debts: Judgments for certain debts cannot be eliminated through bankruptcy. These include:
- Child support and alimony payments
- Student loans (with some exceptions)
- Tax debts (except under specific circumstances)
- Debts arising from drunk driving accidents or other intentional torts (wrongful acts)
If your judgment stems from a non-dischargeable debt, bankruptcy won’t erase the debt. However, it can still provide benefits by stopping collection actions like wage garnishments and offering a chance to reorganize your finances under Chapter 13 bankruptcy, as described below.
Bankruptcy Can Discharge Money Judgments
The focus of bankruptcy for judgments typically lies in discharging the monetary obligation associated with the judgment. This means you’ll no longer be legally liable to repay the judgment creditor the specific amount stated in the final order from the collection lawsuit. Note that bankruptcy only addresses the personal debt obligation.
Liens Change Everything
A critical factor to consider when discussing judgments and bankruptcy is the presence of liens. A judgment lien is a legal claim a creditor places on your property to secure debt payment. Even if the underlying debt is dischargeable through bankruptcy, the lien itself may not be eliminated.
For instance, if a lawsuit judgment resulted in a lien on your house, filing for bankruptcy might discharge the debt itself, but the lien on the house could persist. This means the creditor could still potentially foreclose on your property to recover the owed amount.
Judgments for Nondischargeable Debt
As mentioned earlier, judgments for certain debts cannot be discharged in bankruptcy. If your judgment falls under this category, bankruptcy won’t eliminate the debt. However, there might still be advantages to consider.
- Stopping Collection Actions: Even if the debt remains, bankruptcy can halt collection efforts like wage garnishments and bank levies. This provides temporary relief and a chance to develop a repayment plan.
- Chapter 13 Reorganization: Chapter 13 bankruptcy allows you to create a court-approved repayment plan to manage your debts, potentially including the non-dischargeable judgment. This plan typically lasts 3-5 years and involves making monthly payments to a court-appointed trustee who distributes the funds to your creditors.
Creditors’ Rights Without a Money Judgment or Lien
If a creditor hasn’t obtained a money judgment or placed a lien, their collection options are limited. They might resort to sending collection letters or attempting to contact you directly to request payment. However, without a judgment, they cannot legally garnish your wages or seize your assets.
Considering Bankruptcy for a Lawsuit Judgment in California
If you’re facing a lawsuit judgment in California, considering bankruptcy can be a wise move. However, the decision requires careful evaluation of your specific situation. Here are some key steps to take:
- Review the Judgment: Carefully examine the judgment documents to understand the type of debt it represents and whether it might be non-dischargeable.
- Consult a California Bankruptcy Attorney: An experienced bankruptcy attorney can assess your situation, explain your options under California law, and guide you
Get in Touch with a Bankruptcy Attorney ASAP
Don’t wait any longer to deal with the burden of a lawsuit judgment. Kostopoulos Bankruptcy Law can help you explore your options and fight for a fresh financial start. Time is of the essence, as California judgments can be enforced for ten years.
Contact us today for a free, no-obligation consultation. Call us at 877-969-7482 to speak with a trusted California bankruptcy attorney. Don’t let a judgment control your future – take action now!
Related Content:
How to Avoid Paying a Civil Judgement on Your Credit Report in California
How to Remove a Judgment Lien from Property Chapter 7 in California
Who Pays for Bankruptcies in California?
Should I Hire an Attorney for Debt Settlement in California?
How Much Does it Cost to File Bankruptcy in California?
FAQs About Judgments and Bankruptcy
This article should answer the key question: Can you file bankruptcy on a judgment in California? Still, you may need additional details. Some answers to frequently asked questions regarding judgments and bankruptcy are helpful.
What happens if a defendant does not pay a judgment in California?
If a judgment debtor (the person who owes the money) in California fails to pay the judgment, the creditor (the person awarded the money) can pursue various collection methods. These may include wage garnishment, bank account levies, or even property liens and foreclosure (for secured debts).
How long does a judgment last in California?
A judgment in California generally remains enforceable for ten years. After ten years, the creditor may need to take steps to renew the judgment to continue collection efforts.
Is a judgment a secured debt in bankruptcy?
Not all judgments are secured debts in bankruptcy. A judgment itself doesn’t necessarily create a lien. However, if the underlying lawsuit involved a secured debt (like a mortgage or car loan), the lien might remain attached to the property even after the debt is discharged through bankruptcy.
What personal property can be seized in a judgment in California?
California law exempts certain types of personal property from seizure by creditors in a judgment collection process. This includes essential items like household furniture, clothing, and tools needed for your profession. However, non-exempt assets like valuable jewelry or luxury cars could be at risk. It’s crucial to consult with a bankruptcy attorney to understand California’s exemption laws and how they apply to your situation.