If you’ve had a lot of debt for a long time, there is a good chance there’s at least one judgment against you when you file for Chapter 7 bankruptcy. Since you’ve gone to the trouble of filing for bankruptcy, you might as well eliminate your judgments along with the rest of your debt. But what exactly happens to your judgments when you file?
Survival of the Judgments
Something a bit frightening happens when you file for bankruptcy. Your judgments don’t die the noble death of a typical creditor. Instead, they actually survive the bankruptcy. Luckily, what’s left is only a shadow of its former self.
Any liability you once had for your judgment gets erased when you file for bankruptcy. All that remains is the official record that there was once a legal action taken against you in court. But does it have any teeth left with which to bite you?
Lien on Me
There is one instance when a judgment can hurt you post-bankruptcy. If the creditor brought a lien against you, it will survive along with the judgment. But this only becomes a problem if you sell the asset that has as lien against it. And there’s a statute of limitations that applies. If you sell your asset after the statute of limitations ends, the judgment will have no effect. But what if you sell before then?
Please Release Me, Let Me Go
In most cases your attorney can file a release of lien with the court to eliminate the lien that survived your bankruptcy. This will likely cost you some additional attorney fees, but if you’re going through the trouble to eliminate your other debt by filing for Chapter 7 bankruptcy, it might make sense to release any surviving liens so you are left with an absolutely clean slate in the end.