Frequently when people fall behind on their payments, they are taken to court by their creditors. More often than not, the creditor wins in such cases, and a judgment is entered against you. Fortunately, in the majority of such cases, the judge’s word isn’t the final say in the matter. Bankruptcy can discharge most debts, and in some cases even judicial liens. The big exceptions, of course, are priority debts and student loans.
Judgments Against Unsecured Debts
Suppose your credit card company sues you because you are so far behind on your payments and it wins. But just because a judge orders you to pay a debt doesn’t mean you have any more money in the bank, so you might even have your wages garnished. If you file bankruptcy, the garnishment stops, and most if not all of your unsecured debts will be discharged. The ruling of a bankruptcy judge discharging your debt supersedes that of most other judges.
Judgments Against Secured Debts
Bankruptcy is a powerful tool with exemptions that can usually allow you to keep your car, house, furniture, and other property – as long as you’re willing and able to keep making your payments against your secured debts. If that’s the case and you have a judicial lien against your property, it can sometimes be modified or even avoided. In some instances, though, it’s just not feasible to keep these items. Maybe you’re ready to downsize your house anyway. Maybe the car payment is just too high. In these cases, it’s common to end up owing more than the property is worth. The bank repossesses the property, but you’re stuck with a deficiency judgment in which you’re ordered to make payments on property you no longer own. Fortunately, bankruptcy can help. Just like with unsecured debts, deficiency judgments can be discharged. Although you no longer own the property, you can be truly free from those burdensome debts.
The Most Important Part
Don’t lose hope, even if a judge has ruled against you! Bankruptcy is a powerful tool that can help you get a fresh financial start. Contact us today to learn more about how we can help you find financial freedom and peace of mind.
Adam Mack, J.D. Hillary Stirling, research assistant
These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!