A judgment is a court’s determination that a person or business owes another party money. If you fail to make payments, by obtaining a judgment the creditor is putting a lien on any real estate you own in the county and may even have the sheriff take action against your personal property.

But can you file bankruptcy on judgments?  The answer is generally yes.

Here’s what you need to know.

Filing Bankruptcy on Judgments

When a creditor sues you and wins, the court issues a judgment. This may cause significant damage to your credit score if it’s not dealt with accordingly.

When a court files a judgment order in the county prothonotary office, a lien is placed on your real property in the county. A creditor can even then transfer that judgment to other counties where you own any additional real estate. These liens become ‘secured’ by the real estate and may end up otherwise unaffected by bankruptcy. However, if you have limited equity in the real estate (less than the exemptions you are allowed under applicable bankruptcy law) your attorney may be able to petition the court to have some, if not all, of the judicial liens canceled, making that debt unsecured, just like your credit cards and medical bills, and subject to discharge.

Can You File Bankruptcy on Non-Dischargeable Debt?

Generally, a dischargeable debt is wiped out by bankruptcy, while non-dischargeable debt remains. Some examples of nondischargeable debt include:

• Student loans
• Child support
• Spousal obligations
• Some government debt

Creditors may also seek a bankruptcy court ruling that other particular debts are not dischargeable through an adversary proceeding. They use this strategy in fraud situations, such as when an entity owes money for products or services obtained under pretenses, when a malicious act or harm leads to death or physical injury, and other such circumstances.

If the creditor can prove that the debt meets one of these criteria, the court may declare the debt nondischargeable.

What Is Lien Avoidance?

If you do not give creditors a consensual lien (ie. a mortgage), you may be able to remove a lien if it is a nonconsensual judgment lien by filing for bankruptcy. However, it is essential to act quickly, as the longer you wait, the harder it may be to remove it, particularly if you are close to the limit of your real estate exemption. If you act quickly, and the judgment falls within the preference period in bankruptcy – less than 90 days before any filing – it may be possible to avoid the lien even if you are above your real estate exemption.

So now that you know you can file bankruptcy on judgments, what’s next?

Consult with a Bankruptcy Lawyer

Mette, Evans & Woodside’s bankruptcy attorneys have extensive experience helping individuals in Pennsylvania with debt relief and bankruptcy.

Don’t allow judgments to burden you. Reach out to Mette, Evans & Woodside to find out if bankruptcy is the best option. Safeguard your assets and stop creditors from seizing control of your possessions. Get in touch with us today!