Filing Bankruptcy After Someone Gets Judgment
Sometimes, I’ll get a client who can read the writing on the wall. She realizes that very soon she won’t be able to pay her bills. Instead of putting her head in the sand, she decides to short circuit collection efforts against her and file bankruptcy. While bankruptcy should be an option of last resort, filing sooner than later can prevent many problems and let you get on the road to financial recovery right away.
But more often than not, my clients are already getting notices of lawsuits. And even more often, they have not responded to them. When that happens, the creditor will get a default judgment. In Colorado, a default judgment allows the creditor to do several things, including garnishing wages, garnishing bank accounts, and filing a lien against any real estate the debtor owns. A creditor can have 25% of your take home pay.
The second your attorney files your bankruptcy petition, all creditors, including those that have gotten default judgment, must stop all collection efforts and must stop any garnishments. Depending on the timing of the garnishment and your bankruptcy petition, you may get that money back. More likely, though, the bankruptcy trustee will get the money back from the garnishing creditor and distribute it to the rest of your creditors on a pro-rata basis. Unfortunately, once the trustee gets that money back he’ll probably start looking for smaller, unprotected assets, like firearms or unprotected portions of any wages you were due when your petition was filed.
The real complication arises when the creditor has filed a lien against any real estate you own. Your bankruptcy attorney must file a motion to avoid (eliminate) that lien. Otherwise, when you go to sell your real estate, before you can do so, you’ll have to pay the creditor either the judgment amount or some lower settlement amount.
Talk To A Bankruptcy Attorney About How To Stop A Creditor From Collecting A Judgment.
If a judgment lien has been filed against your home or your employer has gotten a notice to garnish your paycheck, bankruptcy can stop a creditor from taking any collection action.We hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy lawyer. You can call 303.331.3403 our use our online scheduling system to make an appointment.
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