Will Bankruptcy Stop a Judgment? What You Need to Know
Bankruptcy effectively stops judgment collection through an automatic stay that halts wage garnishment, bank levies, and property liens. Chapter 7 eliminates judgment debt in four to six months, while Chapter 13 creates affordable payment plans over three to five years. Most consumer judgment debts qualify for discharge, giving you immediate relief and a fresh financial start.
Answer Your LawsuitDid a creditor win a judgment against you? You face serious consequences now. Wage garnishment can take 25% of your disposable income. Bank account levies can drain your savings. Property liens can threaten your home.
Bankruptcy can stop these collection actions. You can eliminate the judgment debt and protect your assets. Thousands of people file bankruptcy each year and rebuild their financial lives successfully.
Stop the Judgment Before It Starts
Facing a debt collection lawsuit? Responding properly can prevent a judgment entirely. Our partner Solo helps you file the right legal response in 15 minutes.
Respond to Your LawsuitHow Bankruptcy Stops Judgment Collection
Bankruptcy is a constitutional right available to every American. The legal process discharges your debts or restructures them through a payment plan. You get legal forgiveness of qualifying debts.
When you file bankruptcy, the court issues an automatic stay. Our partner Solo can help you respond to collection lawsuits before they become judgments. The stay immediately stops all collection activity against you.
Your eligibility depends on your income and assets. Three main chapters apply to individuals facing judgments. Each chapter offers different benefits and requirements.
Chapter 7 Bankruptcy Eliminates Judgments Fast
Chapter 7 is liquidation bankruptcy. You must pass the means test first. The test proves you lack sufficient income to repay your debts.
A trustee will sell your non-exempt assets. The proceeds pay your creditors. You keep exempt property including:
- Your primary home
- $1,000 in personal property value
- $1,000 in car equity
Renters without home ownership get higher exemptions. You can keep $5,000 in personal property and $1,000 in car equity.
The entire process typically takes four to six months. Your judgment debt gets discharged at the end. Creditors cannot pursue you for the eliminated debt.
Chapter 13 Bankruptcy Creates Affordable Payment Plans
Chapter 13 is reorganization bankruptcy. You failed the means test for Chapter 7. Your income exceeds the threshold for liquidation.
You keep all your property and assets. You propose a repayment plan to the court. The plan lasts three to five years.
Your monthly payment amount depends on two factors:
- The value of your non-exempt assets
- Your monthly disposable income
The court uses whichever calculation pays creditors more. You pay no interest, penalties, or late fees during the plan. The judgment stops accruing interest immediately.
After completing your payment plan, remaining dischargeable debts disappear. You emerge debt-free with your assets intact.
Chapter 11 Bankruptcy for High-Value Cases
Chapter 11 applies to cases with substantial debt. You need $1,100,000 or more in secured debts. Alternatively, you need $390,000 or more in unsecured debts.
Businesses typically file Chapter 11. High-net-worth individuals also qualify. The process resembles Chapter 13 with key differences.
Creditors vote on your proposed payment plan. Legal fees run significantly higher. The complexity requires experienced bankruptcy attorneys.
Debts Bankruptcy Cannot Eliminate
Some debts survive bankruptcy discharge. You remain legally obligated to pay them. The judgment stays enforceable for these debt types:
- Federal and state tax claims
- Government fines and penalties
- Court fines and criminal restitution
- Debts omitted from bankruptcy paperwork
- Reaffirmed debts you agreed to keep
- Student loans (except proven undue hardship)
- Child support judgments
- Alimony judgments
- Criminal penalties
Most consumer debt judgments qualify for discharge. Credit card judgments disappear. Medical debt judgments get eliminated. Personal loan judgments vanish.
Removing Judgment Liens Through Bankruptcy
Bankruptcy discharges judgment debt automatically. Judgment liens on property require extra steps. You must file a motion to avoid the lien.
The court examines your property equity. Exempt equity protection matters here. The lien cannot impair your exemption rights.
Successfully removing the lien clears your property title. You keep your home without the creditor’s claim. The judgment creditor loses enforcement rights.
The Automatic Stay Protects You Immediately
The automatic stay activates when you file. Collection activity stops instantly. Creditors must cease all communication attempts.
Protected activities include:
- Phone calls and collection letters
- Wage garnishment orders
- Bank account levies
- Property foreclosure proceedings
- Vehicle repossession attempts
- New lawsuit filings
Pending lawsuits get suspended automatically. The court freezes all collection cases. Creditors violating the stay face contempt charges.
You can recover damages for stay violations. The creditor pays fines and your legal fees. The court takes violations seriously.
Life After Bankruptcy Discharge
Bankruptcy appears on your credit report for ten years. Your credit score drops initially. You face challenges obtaining new credit immediately.
Recovery happens faster than you expect. You can rebuild credit within one year. Many people achieve good credit scores within three years.
Secured credit cards help rebuild credit. On-time payments demonstrate responsibility. Our partner Solo helps you understand your options before judgment happens. Your debt-to-income ratio improves dramatically after discharge.
Consider bankruptcy when other solutions fail. Debt settlement may work for smaller amounts. Negotiating with creditors can reduce balances. Bankruptcy remains your strongest legal protection against judgments.