Judgements and Bankruptcies

What happens when a creditor gets a judgement against you? 

A judgement is just an affirmation that you definitely do owe money and that the creditors have the right to collect on it.  The creditor then has to take that judgement and get it recorded with the local clerk of the court.  This is also where property liens are listed. 

Let’s say that the law protects your home from being seized.  If you do choose to sell your home and the creditor has a judgement filed against you, they can then collect what you owe from the proceeds of that sale. 

 Judgements are good for ten years, but there is a process for creditors to renew it when it expires.  The other tricky feature about a judgement is that the creditors then become entitled to interest.  Say you had a debt of $10,000 and you didn’t pay on it for ten years. The interest accrues over time.  You may now be responsible for $20,000 or even $30,000.

What can filing for bankruptcy do in this situation? 

Filing for bankruptcy creates what is called an automatic stay.  This means that all collection and legal activity will be halted.  Once the bankruptcy is completed the lawsuit is dismissed. 

Even if you’ve already had a judgement against you for not paying on a debt, bankruptcy will wipe it clean.  Just because you have an existing or impending judgement against you, it doesn’t mean filing bankruptcy won’t help. 

A judgement doesn’t have to be the end of the world.