Bankruptcy, The Judgment Enforcement Roadblock
A judgment debtor applying for bankruptcy is about the worst judgment enforcement roadblock a judgment owner can run into. As soon as you find out that your judgment debtor has filed for bankruptcy, you must cease all debt and judgment collection actions. My articles are my opinions, and is not legal advice. I'm a judgment referral expert, and not an attorney. If you ever want legal advice or a strategy to use, please contact a lawyer.
When an entity or person files for bankruptcy, the automatic protection stay begins. An bankruptcy automatic stay applies to all of the debtor's known (and perhaps even unknown) debts, including all lawsuits or judgments which originated before the bankruptcy filing. The stay prohibits any collection activities against a debtor or their assets. After a bankruptcy filing, it is a violation to even call the debtor, asking the debtor about payment for any of their judgment-related or other debts.
The automatic bankruptcy stay is completely automatic. It starts at the time and date of the filing of the bankruptcy petition. The automatic stay doesn't rely on a written order from a judge, for the bankruptcy stay to begin immediately. When anyone, including a judgment creditor, knowingly violates the debtor's automatic stay, they can be found liable for damages, attorney's fees, and sometimes also punitive damages.
In a community property state, an automatic stay also usually stops judgment owners from their goal of the recovery of their judgment against the assets of the community property of a judgment debtor's spouse. If any creditor thinks that their debtor has filed for bankruptcy protection; they should stop all judgment enforcement or debt recovery actions, until they can verify that a bankruptcy filing hasn't taken place.
An automatic stay starts at the moment of the bankruptcy filing, whether it's a chapter 7, 9, 11, 12, or a 13 bankruptcy proceeding. The stay remains active until the bankruptcy proceeding is closed, dismissed, denied, or until the discharge of the debtor's debts are approved. When your debt or judgment is discharged in the debtor's bankruptcy, it's game over, your debt or judgment is gone.
While there are certain judgment debts that might ultimately prevail after their judgment debtor's bankruptcy filing, you need to still honor the automatic stay for as long as it is active. Automatic stays usually last as long as the bankruptcy case is still proceeding. If a creditor files their adversarial action, and a bankruptcy judge approves an order, the creditor may get a leave of the automatic stay, and be allowed to recover the debt or judgment, and competing creditors won't be allowed to recover from the debtor.
Bankruptcy is usually fatal to the enforceability of judgments, so it's the number one enemy of every judgment recovery. When you suspect your judgment debtor has or will file for bankruptcy, It's a good idea to verify their bankruptcy situation prior to each step, with PACER; the Federal Court web site. PACER is really inexpensive, and almost a must for anyone who recovers judgments or debts.
Bankruptcy is so scary, it is abused by debtors to trick creditors. For every three judgment debtors that say they will go bankrupt immediately, one really does. Bankruptcy is so serious that some creditors don't verify the bankruptcy filing, they simply give up.
Another trick some debtors use, is to file for bankruptcy protection, but not actually follow up with their bankruptcy case. They only file so that they can get their automatic stay. Many creditors assume the bankruptcy filing automatically means that their judgment is automatically discharged, however that happens only after the judgment debtor's bankruptcy successfully concludes and the court orders that. That is one more reason to get and use a PACER account.
Judgment owners should stay informed about their debtor's bankruptcy court proceedings. When their judgment debtor's bankruptcy case is dropped, dismissed, or denied, the judgment owner is then free to crank up the judgment enforcement machinery once more.
About the Author
http://www.JudgmentBuy.com - Judgment Enforcement. The free, easiest, fastest, and best way to recover your judgment money. Mark Shapiro - Do you have a judgment? Do you have leads for people with judgments that want them bought or recovered? Do you buy or recover judgments? If so, JudgmentBuy.com is for you!
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