Filing for bankruptcy provides you with the most powerful protection available from judgments. A judgment is a legal decision ordering you to pay a specific amount of money after losing a lawsuit. However, if you file for bankruptcy, you do not have to pay the judgment while a federal bankruptcy court reviews your case. The bankruptcy may eliminate the judgment entirely or establish a court-ordered payment plan. It is possible to file for bankruptcy before or after a judgment.
The Automatic Stay
A provision in bankruptcy called the automatic stay takes effect the day you file for bankruptcy. The automatic stay stops collection on all debts, including judgments. With the automatic stay in place, a debt collector or the party filing suit against you cannot enforce the judgment in any way, including through bank or wage garnishment. The automatic stay is a primary reason many people file for bankruptcy.
Emergencies
Bankruptcy courts offer abbreviated application forms for people needing to immediately file for protection. The application is just a few pages long and allows you to begin receiving protection under the automatic stay, with a deadline set for submitting a complete application. Generally, a judgment does not merit an emergency filing unless the party holding the judgment is garnishing the debtors bank account or wages. The automatic stay ends all garnishment activity.
Considerations
You must include all debts in a bankruptcy filing, not just judgments. Bankruptcy severely harms your credit, with years needed for a full recovery. Seek alternatives for resolving judgments before selecting bankruptcy. Judgments are resolvable through debt settlement before and after the judgment. Debt collectors who have initiated legal action may insist on settlements for the full amount of the debt, however. Settlements are possible in a lump sum or installments.
Bankruptcy Types
Some people with judgments file for Chapter 7 bankruptcy. Its the simplest and fastest way to resolve judgment debt. Judgments are an unsecured debt similar to credit card debt. Chapter 7 completely eliminates credit card debt in a few months. Chapter 13 is another form of bankruptcy but requires a payment plan lasting three to five years. Both chapters feature the automatic stay.
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