Being the subject of a lawsuit is always stressful and any judgments against you can significantly affect your finances. In fact, many legal judgments require a person to file for bankruptcy because they cannot afford to pay the judgment. If you are in this situation, it is important to understand how legal judgments are treated in Chapter 13 bankruptcy. Below is some general information and our attorneys can advise you regarding your specific circumstances.
The Automatic Stay
First, when you file for Chapter 13 bankruptcy, the court will order an automatic stay, which halts all attempts to collect your debts. This includes pausing legal actions against you or attempts to enforce existing judgments. This can include stopping wage garnishments and other forms of collections that cause mental and financial stress.
Repayment Plan and Discharge
In a Chapter 13 case, all of your debts will be wrapped up together and you will make one monthly payment to the court for three to five years. The bankruptcy trustee will pay off your highest priority debts first and then will pay off as much as possible of your unsecured and other lower-priority debts. At the end of your predetermined repayment plan, any remaining debts that are eligible for discharge will be eliminated, which includes many legal judgments.
Judgments That Are Nondischargeable
Bankruptcy courts will not discharge every type of legal judgment, however. Some judgments that can survive a bankruptcy is they are not paid in full by your repayment plan include:
- Fines and penalties to government agencies
- Criminal fines and restitution
- Personal injury judgments or wrongful death judgments from drunk driving accidents
- Personal injury judgments or wrongful death judgments from malicious or willful conduct
- Debts arising from fraudulent or criminal conduct, such as embezzlement
- Child support, alimony, or other domestic orders
If the majority of your legal judgments fall into the above categories, Chapter 13 bankruptcy may not be the solution for you.
Some creditors that obtain legal judgments can attach a lien to your property, which will need to be paid before you can sell your property or the creditor will take payment from the proceeds of the sale. Your attorney can advise you whether it is possible to strip those liens in a Chapter 13 bankruptcy case. Lien stripping involves including the liens as unsecured debt in your repayment plan, which can effectively take care of the lien in many cases.
Our St. Petersburg Chapter 13 Bankruptcy Attorneys Can Assist You
If you are facing lawsuits by creditors, injured parties, business partners, or other parties, you may end up with a legal judgment against you that can ruin your finances. If you already have a judgment in place, enforcement of the judgment through garnishment, levies, or liens can also seriously affect your financial situation. In either case, you should discuss your options with a Chapter 13 lawyer at Berkowitz & Myer as soon as possible. Call our office at (727) 344-0123 or contact us online to set up a consultation regarding your debt relief options.