Erasing Past Debt Judgments with Bankruptcy Discharge

Bankruptcy is a legal procedure for dealing with the debt problems of individuals and businesses and discharges financial obligations. Majority of cases are filed under the two main chapters of the Bankruptcy Code, which are Chapter 7 and Chapter 13.

Discharge

A bankruptcy discharge provides the debtor with a fresh start in life. Debts discharged in bankruptcy can no longer be enforced against the debtor personally. Bankruptcy discharges most debts. Some debts however cannot be discharged by bankruptcy.

Debts that cannot be discharged

Details of those debts which cannot be discharged are given in 11 U.S.C. sec. 523. It is rather a longish list, but the following debts will, inter alia, not be discharged: taxes; spousal and child support; debts arising out of willful misconduct and or malicious misconduct by the debtor; liability for injury or death from driving while intoxicated; non-dischargeable debts from a prior bankruptcy; student loans; criminal fines and penalties and forfeitures.

Judgments

Most debt judgments can be discharged by filing either Chapter 7 or Chapter 13 bankruptcy. The law typically looks at the nature or cause of the debt judgment, not just the fact of its existence. Only unsecured debts are discharged in bankruptcy. In a Chapter 7 proceeding, the trustee will take over the collateral and liquidate it to pay the secured creditor. In a Chapter 13 proceeding, the debtor can negotiate the payment terms and retain the collateral. A judgment lien is considered a secured debt since all of your property secures it. Within certain limits, liens on wages, bank accounts and real estate that arise from judgments can be discharged. When you file a bankruptcy, all action to enforce or perfect the judgment lien will stop immediately pursuant to the automatic stay. During the course of your bankruptcy proceeding, you should file a Motion to Avoid the Judicial Lien pursuant to Section 522 of the Bankruptcy Code. If the judicial lien is avoided the secured judgment lien becomes an unsecured debt paid at the same percentage as your other unsecured debts. If you don't avoid the lien, the judgment lien will be paid in full by the trustee as a secured claim.

Getting Legal Bankruptcy Help

Consult with an experienced bankruptcy attorney. With proper guidance and planning, you will be able to erase certain past judgment debts in bankruptcy.

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