Judgment Bankruptcy, Judgment Collection Roadblock

Judgment bankruptcy is pretty much the worst judgment collecting roadblock you might face. Normally as soon as you find out that your judgment debtor has filed for bankruptcy, you need to cease all judgment collecting activities.

When a person or entity files for bankruptcy, an automatic stay arises. The automatic stay applies to any judgment entered prior to the bankruptcy filing. The stay prohibits all enforcement against the judgment debtor, or the property of the estate. It is a violation to even make a telephone call asking for payment of the judgment debt.

If a judgment creditor willfully violates the automatic stay he can be found liable for actual damages, attorney’s fees, and even punitive damages in some cases.

The automatic stay also prohibits the judgment owner from pursuing the enforcement of a judgment against a judgment co-debtor as well as a judgment debtor’s spouse in a community property state.

The automatic stay is automatic. It occurs with the filing. It does not depend on a written order by a judge for the stay to take effect. If a creditor suspects that bankruptcy has been filed, he would do well to halt judgment enforcing until he can discover absolutely for sure that a bankruptcy filing has not taken place.

The automatic stay is in effect from the time of a filing whether it is a chapter 7, 9, 11, 12, or 13 bankruptcy case. The stay remains in effect until the bankruptcy case is closed or dismissed, or otherwise until the discharge of debts is granted or denied.

There are some judgment debts that can survive a filing of bankruptcy. Even if you have a judgment that meets the criteria for this, you still must honor the automatic stay for as long as it applies.

Bankruptcy can be fatal to the enforceability of a judgment. The truth is, most judgments are D.O.A. when the judgment debtor files bankruptcy. Bankruptcy is the number one enemy of any judgment collector. It is wise to tread softly with any judgment collecting if you suspect that you might push the debtor into filing for bankruptcy. This is an example of why it is extremely helpful to gain as much knowledge about your judgment debtor as possible.

One other thing to be aware of is the tactic used by many judgment debtors who say that they filed for bankruptcy when they did not actually file. This happens all of the time.

Another thing is to realize that many debtors do indeed file for bankruptcy, but never follow through with the case. They only file so that they can get the automatic stay. Many creditors assume a filing means that their money judgment will be discharged. It is not safe to assume that. Since there are many times when the judgment debtor drops the bankruptcy case after filing, it only makes sense for a judgment owner to stay informed about the bankruptcy proceedings. If the case is dropped, the judgment creditor is then free to crank up the judgment enforcement machinery once again.

Bankruptcy is a sobering event for any creditor. I hope you never have to experience the frustration that comes from it. Let’s keep our fingers crossed that you can successfully enforce your judgment without running into this roadblock.

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