Is it possible to bankrupt against a legal judgement?

Let's assume this debt is a garden variety dischargeable debt. (In other words its not for child support, a fine, taxes, etc.)

When you file BK that stops the court case against you that your are concerned will result in a judgment. (Of course you have to notify that court of the BK filing). So no judgement is issued by the court.

If you file BK after the judgment is recorded against your property the BK discharges (wipes out) the debt that underlies the judgment. But there is an additional procedure requrired to remove the judgment lien from your property. This procedure is called "avoiding the lien"

I practice in both San Diego and LA.

It depends. Most unsecured debts are discharged in bankruptcy. Some debts are *not* dischargeable in bankruptcy: those incurred by fraud, conversion, embezzlement, larceny, breach of fiduciary duty and willful and malicious injuries to person or property; recent taxes, child support, drunk driving judgments. Student loans are usually not discharged in bankruptcy.

So the answer is, it depends upon the nature of the judgment. If it's for something like honestly incurred credit card debt, it's probably dischargeable. If it's for certain kinds of bad behavior, like those listed above, then not dischargeable.

I'm not licensed to practice law in California so don't take what I say here as legal advice. It's simply my analysis of the facts you present based on general principles of law. If you need legal advice, please consult a lawyer who holds California licensure.

My colleague is correct as to what would happen in CA. You have to determine if ruining your credit for 10 years is worth the money you will save by not paying the judgment.

The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change.

Yes. Filing a bankruptcy petition automatically makes proceeding to a judgment a violation of bankruptcy law. However, to make sure that creditors know you have filed bankruptcy, you must list that creditor in your bankruptcy petition at an adress that you know will accept mail for them. Bankruptcy law says that the address that you last received notice from the creditor at is the one you should use. You can also notify the person's collectors or attorney. If you list the creditor properly, it is rare that they will file a lawsuit. If a lawsuit has already been filed, the creditor cannot proceed to obtain a final judgment without permission of the bankruptcy court.

I find the suggestion that you must weigh the cost of paying a debt against the cost of "ruining your credit for ten years" to be a false choice.

While a bankruptcy filing stays on your credit report for ten years, it hardly "ruins" your credit for ten years - at least not when people who are two or three years post-bankruptcy are getting home mortgages at favorable rates .... As time passes, the bankruptcy filing will have less and less effect on your credit and your more recent behavior - jobs, payment history, etc. - will have greater effect.

Talk candidly with your bankruptcy lawyer, the one in your area, to see what his/her client's experiences are. I suspect that, like mine, they will find that the bankruptcy filing has a rapidly diminishing effect on their creditworthiness after a couple of years...

The best way to analyze nearly any bankruptcy-related legal question is to first determine how the matter is treated outside bankruptcy, and then to determine how, if at all, a bankruptcy filing changes things. In nearly all states, and certainly in California where most of my law practice is based, a judgment, without more, does not give the creditor any greater rights than a creditor without a judgment. A judgment does, however, give the creditor a "ticket" to enforce its judgment against the debtor’s assets. This can include filing an abstract of judgment against real property, levying on bank accounts, garnishing wages. The debtor can also be required to sit for a judgment debtor's examination, where he/she must answer all questions regarding the nature and location of assets that can be used to satisfy the judgment.

Determining whether or not to file bankruptcy requires the consideration of many factors, only one of which is the existence of a judgment. Enforcement activity by a judgment creditor, however, can disrupt a debtor's financial life enough that bankruptcy is nearly a necessity.

The filing of a bankruptcy, through the automatic stay, stops any further enforcement activity regarding a judgment. Judgments which have been recorded as a lien against real property, however, stay on the record as an involuntary lien. The filing of a bankruptcy, without more, has no effect on the lien. There is a special procedure in bankruptcy where the debtor may be able to “avoid" the lien. As you can see, none of this is simple, and requires a consultation with a qualified bankruptcy attorney with substantial experience in individual cases. Good luck.

David Reeder

Is it legal for a creditor to still have a judgment on file at the courthouse after the debt has been discharged in bankruptcy if the judgment was obtained one month before filing for chapter 7? the judgment was for unsecured credit card debt. the creditor was listed in the bankruptcy petition.

The order for discharge reads all judgments are to be null and void with any debt discharged in the bankruptcy.