If a judgment has been entered against you in a lawsuit, it can feel overwhelming. Understanding the implications of that judgment and how it interacts with bankruptcy can help you decide on the best course of action.
Here’s what you need to know about judgments, creditor actions, and the role of bankruptcy in resolving your financial challenges. Contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free legal consultation with a bankruptcy attorney.
How Creditors Collect on a Judgment
Once a judgment is entered against you, creditors have several legal tools to collect the debt, including:
- Wage Garnishment: Creditors can take a portion of your paycheck directly from your employer.
- Bank Account Levy: They may freeze or withdraw funds from your bank accounts.
- Receivership: If you own a business, a receiver can be appointed to manage and collect its assets.
- Asset Disclosure: You might be required to testify in court about your assets, allowing creditors to locate and seize them.
These collection methods can make it difficult to manage your finances, especially if interest and fees are added to the judgment.
Judgments Can Accumulate Additional Costs
A judgment’s original amount is rarely the total you’ll have to pay. Additional costs often include:
- Collection Fees: Costs incurred by the creditor to enforce the judgment.
- Interest: In California, judgments accrue interest at a rate of 10% annually, significantly increasing the total amount owed.
- Court Costs: Fees associated with court actions to enforce the judgment.
The longer a judgment goes unpaid, the more it can grow, further straining your financial situation.
Discharging Judgments Through Bankruptcy
One of the most significant benefits of bankruptcy is the ability to discharge certain types of debts, including those that have been reduced to judgments. When determining whether a debt is dischargeable, bankruptcy courts focus on the nature of the debt itself rather than the judgment.
For example:
- Unsecured Debts: Credit card balances or personal loans that have been reduced to judgments are typically dischargeable.
- Non-Dischargeable Debts: Some obligations, such as child support, alimony, and certain tax debts, cannot be discharged through bankruptcy.
Filing for bankruptcy can halt collection actions, including wage garnishment and bank levies, while the court evaluates your case.
The Lifespan of a Judgment
Judgments don’t last forever, but they can remain enforceable for a significant period. In California, a judgment is valid for 10 years and can be renewed before it expires. If a creditor renews the judgment, it can extend its enforceability for another decade.
Deciding whether to wait out a judgment or address it through bankruptcy depends on several factors:
- Age of the Judgment: If the judgment is nearing expiration and unlikely to be renewed, waiting may be a viable option.
- Collection Activity: If the creditor is actively pursuing collection, filing for bankruptcy might provide faster relief.
Is Bankruptcy the Right Solution for You?
Bankruptcy isn’t a one-size-fits-all solution, but it can be an effective way to address judgments and regain financial stability. Factors to consider include:
- Your Overall Debt: Bankruptcy may be more beneficial if you have multiple debts in addition to the judgment.
- Your Income: Your eligibility for Chapter 7 or Chapter 13 bankruptcy will depend on your income and financial situation.
- Judgment Amount: If the judgment is a significant burden, bankruptcy may provide relief.
Find Out How Bankruptcy Can Help
If you’re facing a judgment and struggling with debt, bankruptcy could be a powerful tool to help you move forward. However, every situation is unique, and the best approach depends on your circumstances. Contact Law Offices of Terrence Fantauzzi for a free consultation to explore your options and take the first step toward financial freedom. Let us help you determine if bankruptcy is the right solution for you.