Does bankruptcy clear a civil judgment? This is a question that often plagues individuals who are facing both financial difficulties and legal liabilities. Bankruptcy is a legal process that provides debtors with a fresh start, but whether it can also discharge civil judgments is a complex issue that requires a detailed understanding of bankruptcy laws and the nature of civil judgments.
Bankruptcy is a legal proceeding that allows individuals or businesses to eliminate or restructure their debts under the protection of the bankruptcy court. There are different types of bankruptcy, including Chapter 7, Chapter 13, and Chapter 11, each with its own set of rules and benefits. When it comes to civil judgments, these are court orders that require a debtor to pay a specific amount of money to a creditor due to a breach of contract, tort, or other legal disputes.
Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, is designed to provide debtors with a quick and complete discharge of their debts. In this process, the debtor’s non-exempt assets are liquidated to pay off creditors, and any remaining eligible debts are discharged. However, the discharge of civil judgments in Chapter 7 bankruptcy is not automatic and depends on several factors.
Firstly, the judgment must be a “non-priority” debt, meaning it is not a secured debt (such as a mortgage or car loan) or a priority debt (such as child support or alimony). If the judgment is for a priority debt, it will not be discharged in Chapter 7 bankruptcy. Secondly, the judgment must have been obtained before the bankruptcy filing date or within 90 days after the filing date, depending on the circumstances. If the judgment was obtained after the bankruptcy filing, it may still be enforceable against the debtor’s assets.
Chapter 13 bankruptcy, on the other hand, is a reorganization bankruptcy that allows debtors with a regular income to keep their property and pay off their debts over a period of three to five years. In Chapter 13, the debtor’s non-exempt assets are not liquidated, but they must propose a repayment plan that is approved by the bankruptcy court. Civil judgments that are non-priority debts can be included in the repayment plan and may be discharged at the end of the plan’s term, provided that the debtor completes all payments as required.
It is important to note that bankruptcy does not automatically clear all civil judgments. Certain types of judgments, such as those for criminal fines, certain tax debts, and student loans, are not dischargeable under any chapter of bankruptcy. Additionally, even if a judgment is dischargeable, the creditor may still have the right to collect on the judgment by enforcing a lien or other security interest against the debtor’s property.
In conclusion, whether bankruptcy clears a civil judgment depends on the type of bankruptcy, the nature of the judgment, and the specific circumstances of the case. It is crucial for individuals facing both financial and legal challenges to consult with a bankruptcy attorney to understand their options and the potential impact of bankruptcy on their civil judgments. By doing so, they can make informed decisions about their financial future and seek the best possible outcome.
