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Bankruptcy and Civil Judgments

by Erin B. Shank

In the last few years bankruptcy filings have reached record numbers as a result of the financial crisis faced by the nation. People make the decision to file for bankruptcy protection for a number of reasons. We are seeing a vast majority of our clients come in for a bankruptcy consultation because they have been sued by a creditor. Credit card companies are filing more and more collection suits and filing a bankruptcy case can stop the lawsuit and discharge the debt and the civil judgments.

The easiest way to explain how a civil judgment can impact your life and how it can be handled through bankruptcy is by using an example. Imagine that you purchased a home ten years ago. To finance the home, you obtained a mortgage loan, as most homeowners do. You faithfully paid on that loan until the worsening U.S. economy caused you to lose your job. You used your savings to pay the mortgage until your savings ran out. Eventually, the lender foreclosed on the home. Although you thought that was as bad as it gets, you found out months later that a deficiency amount remained after your home was sold by the lender, meaning you still owed them a considerable amount of money. The lender took you to court and obtained a civil judgment for the amount remaining owed to them. Now, you are out of a home and have a civil judgment against you. With that civil judgment the creditor can potentially put a lien on assets you owe or garnish your bank account. Although you are now working again, you know you cannot pay off the judgment and the interest continues to accrue daily. This is where bankruptcy can help you!

That civil judgment will remain on your credit history for ten years or more. Worse still the creditor can attempt to collect on the judgment for that entire ten-year period. If you file for bankruptcy protection, however, the lawsuit will immediately stop and you will be discharged from the debt owed to the creditor. Therefore, your assets and money are immediately protected from the creditor when you file a bankruptcy case.

Most civil judgments can be completely discharged in a chapter 7 bankruptcy, meaning the debt will be wiped out and forgiven. Even if you file under a different chapter, the amount you are required to pay back will likely be less than what you currently owe. Most debtors, however, can file a chapter 7 bankruptcy which will result in a clean slate with regard to your credit and a huge burden off your shoulders.

erin b shank

I have been practicing exclusively bankruptcy law in Texas for almost 40 years. Unlike most other law firms, my firm is exclusively dedicated to helping individuals and small businesses find a way out of their financial difficulties through the use of our nation’s bankruptcy laws.

Associations & Awards
  • Client Companion Award | Erin B. Shank
  • Avvo Review Badge
  • Preeminent Award | Erin B. Shank
  • avvo
  • state bar of texas
  • avvo
  • Avvo Top Attorney Badge
  • GreaterWacoChamber
  • nacba
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