File bankruptcy before or after judgment

But it is best to deal with judgments before they are attached to the property. Nondischargeable debts include student loans, child support, spousal obligations, debts owed to the government fines, court costs, taxes, restitution in criminal cases and more.

As a general rule, it is better to file a bankruptcy case before a judgment is entered. In most cases, if a judgment has been entered or a lawsuit has been filed, it does not change whether you can discharge the debt in the bankruptcy.

Creditors can ask the bankruptcy court to make a dischargeable debt become nondischargeable by filing an adversary proceeding. The types of dischargeable debts that can trigger an adversary proceeding are:.

If the judgment does not fall into these categories, the creditor will not likely object to your discharge. Getting a bankruptcy discharge can bring relief, especially if the lien from your creditor can be attached to important assets, like your house.

But there is a way for you to get rid of your judgment and this is called lien avoidance. As long as you did not give the creditors consent for the judgment, you can remove the lien on your properties and assets with a chapter 7 bankruptcy. There are some requirements for this direction, which you should discuss in more detail with your bankruptcy lawyer.

Please note that it is critical to follow bankruptcy procedures to avoid the lien. Statistics Canada. Bankruptcy laws were set up to allow people in dire straits to wipe their slates clean and start fresh.

As I discussed in my article on When You Should File Bankruptcy , ;it is always better to consider your bankruptcy and non-bankruptcy options earlier, rather than later. Doing so enables you to minimize the costs and problems, and maximize the benefits of filing a bankruptcy. However, as long as you are eligible to file under one of the bankruptcy chapters , you can still eliminate or restructure debts that are owed after a lawsuit is filed and even after a judgment has been entered against you.

The fact that there is a lawsuit or judgment does not affect affect your bankruptcy options , unless the judgement had a finding of fraud or other element that is excepted from discharge in bankruptcy. It is, nevertheless, usually best to file bankruptcy before a judgment is entered. The creditor can also then place a lien against property, which may or may not be removable in bankruptcy.

For many years, judgments and liens appeared in the public records section of credit reports, but that is no longer the case. Bankruptcies are now the only public records collected and listed on credit reports maintained by the three national. Chapter 7 bankruptcies appear on your credit reports for 10 years from the date of the bankruptcy filing, while Chapter 13 bankruptcies remain for seven years from the filing date.

A bankruptcy negatively affects your credit score as long as it remains on your credit report, but its impact diminishes over time.

Since judgments and liens no longer appear on credit reports, they have no effect on credit scores. Legal judgments and their consequences, including garnished wages and drained bank accounts, can compound the distress of mounting debt. Filing bankruptcy is stressful in its own right, but it can bring instant relief from judgments, in many cases eliminating them permanently. Assuming the underlying debt is wiped out in your Chapter 7 bankruptcy case, the judgment remains nothing more than an empty shell.

The creditor cannot freeze your bank account, seize your wages, or take any further action against you. However, the judgment may remain;on record as a valid lien against any property you owned at the time your Chapter 7 bankruptcy was filed. The creditor cant do anything with the lien, but it will need to be paid off in the event that you try to sell the property while the judgment is in place. Under California law, a judgment becomes a lien on land, a house or other building you own only if the judgment creditor files an Abstract of Judgment.

In other states such as New York, however, the judgment is automatically a lien against property. Before anything else, you need to remember that bankruptcy will leave a significant effect on your credit report, which will last from 7 to 10 years. Its a decision that should not be taken lightly. Chapter 7 and Chapter 13 bankruptcy can help get rid of your medical debt.

But the processes involved are different for each type of legal proceeding. If you dont have a regular or stable income and your assets have little to no equity, a Chapter 7 bankruptcy may be a good option.

Theres no cap to the number of debts you need to have. Chapter 7 bankruptcies appear on your credit reports for 10 years from the date of the bankruptcy filing, while Chapter 13 bankruptcies remain for seven years from the filing date. A bankruptcy negatively affects your credit score as long as it remains on your credit report, but its impact diminishes over time. Since judgments and liens no longer appear on credit reports, they have no effect on credit scores.

Legal judgments and their consequences, including garnished wages and drained bank accounts, can compound the distress of mounting debt. Filing bankruptcy is stressful in its own right, but it can bring instant relief from judgments, in many cases eliminating them permanently. What's on Your Credit Report?

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Please understand that Experian policies change over time. In some judicial foreclosures , though, the deficiency judgment can be included in the foreclosure judgment. If your lender comes after you for the deficiency, and you later file for bankruptcy, bankruptcy will discharge eliminate the deficiency debt.

But for many people, it makes more sense to file bankruptcy before foreclosure to discharge the mortgage debt preemptively. Then you don't have to worry about the possibility of a deficiency judgment. This tactic can provide peace of mind because once the mortgage debt is discharged, you know you won't have to face a lender's lawsuit to recover the deficiency after the foreclosure.

Of course, if your state's laws prevent the lender from getting a deficiency judgment, you don't need to take this approach. Another reason to file bankruptcy before the foreclosure is because if your lender forecloses and cancels the deficiency debt rather than seeks a deficiency judgment, you might have to include the canceled amount as income on your tax return. If that happens, you generally must pay tax on that forgiven debt unless you qualify for an exception or exclusion such as:.

The Mortgage Debt Relief Act of and its various extensions exclude forgiven debt from your taxable income if the loan:. The exclusion can also apply to debts forgiven as the result of a written agreement entered into before January 1, , even if the actual discharge happens later.

If you were insolvent when the debt was canceled, some or all of the debt might not be taxable to you. You're considered insolvent if your total liabilities debts are more than the fair market value of your total assets. To learn more about the insolvency exception, visit the IRS website.

If your lender forgives the deficiency before you file for bankruptcy, and you don't qualify for an exclusion or exception that would exclude the forgiven debt from your taxable income, filing for bankruptcy afterward probably won't eliminate your tax debt. On the other hand, if you file bankruptcy before the foreclosure, the mortgage debt will be discharged, and you wouldn't incur federal tax liability because there won't be any forgiven deficiency debt.

If you have any other mortgage debt, like a second mortgage or a HELOC , it could be wise to file bankruptcy before the foreclosure to wipe out your personal liability for those debts. When the first mortgage lender eventually forecloses, any junior mortgage lenders second mortgages and HELOCs, for example will also be foreclosed and lose their security interest in the real estate.

Generally, if a junior mortgage lender has been sold-out in this manner, that junior mortgage lender could potentially sue you personally to collect the debt. But a bankruptcy will eliminate any debt secured by a second mortgage or a HELOC, and you can avoid future lawsuits from these lenders.