As a Waco Bankruptcy Lawyer and a Killeen Bankruptcy Lawyer, I am frequently asked this question. The answer is No, it is never too late. However, waiting until after a Judgment is entered may not be a good idea.
When you file a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case, an “automatic stay” immediately comes into place stopping virtually all civil litigation and collection activities. The “automatic stay” prohibits creditors from continuing to sue you, filing a lawsuit against you or enforcing a judgment against you. If you have been sued, this means that lawsuit must stop. If you have been sued but a judgment has not yet been entered by the Court, that creditor is treated just like any other unsecured creditor.
However, if you waited until after a judgment has been entered against you, then what? First, in the State of Texas if the judgment creditor filed a document called an “Abstract of Judgment” in the Deed Records in the county in which you own any real estate, that Judgment becomes a lien on that real estate. If that real estate is your homestead, that Abstract of Judgement lien can be released by asking the Bankruptcy Court to enter an order avoiding it and then recording a copy of the Bankruptcy Court’s order avoiding that Judgment lien in the real property records in the County where your home is located.
Assuming that you have real estate that is not your homestead and an Abstract of Judgment is filed in the Deed Records where that property is located, that judgment lien attaches to that real estate. That judgment creditor is now a secured creditor and you must deal with the creditor by either surrendering the property or allowing the judgment creditor to have the sheriff sell the property. That debt can potentially be dealt with very favorably in a Chapter 13 bankruptcy case if you would like to try to keep that non-exempt property.
If a Judgement creditor has a judgment against you, that creditor can also ask the Sheriff or constable to come to your home and determine if you have any non-exempt property with which to satisfy that judgment lien. Also, many Judgement creditors send a long list of questions called “Interrogatories” to individuals that they have judgments against in which they will ask you to disclose all of your assets and liabilities. If you don’t answer those questions, a Court can order you to do so or you will be held in contempt of Court.
All of that activity can be stopped if a Chapter 7 bankruptcy case or a Chapter 13 bankruptcy case is filed.
As you can see, if you have a creditor suing you or you have a judgment against you, it is best to consult with a good bankruptcy attorney. Your creditors have lawyers and you need one too! Please visit our website at www.centraltexasbankruptcy.com to learn more about our firm and the relief available under the federal bankruptcy laws.