11 Feb Are court judgments for money owed eliminated in bankruptcy?
Most banks and creditors file an action in court to recover money whenever the debtor failed to pay on time. When you are saddled with debts, there will be many creditors filing lawsuit. The purpose of the lawsuit is to recover whatever money the debtor may have in their bank accounts and to garnish money from debtor’s wages. If you are being sued, do not waste your time, immediately contact an attorney to defend you. As a last resort you can file for bankruptcy.
Question: Will bankruptcy eliminate court judgments for money owed?
Answer: Generally, filing bankruptcy effectively eliminates judgments for money owed, tort liability such as liability for personal injury, and other types of general liability. These will include adverse court rulings on loan defaults, nonpayment of credit cards, breach of contract and many others.
Question: Will bankruptcy eliminate liability based on secured debts?
Answer: If you lose your home through foreclosure and there is a deficiency balance on the second or third loan, this balance can be eliminated by filing bankruptcy. This usually happened when you refinanced your house and got some money by getting a second or third loan. This deficiency balance is a contractual liability created by the secured notes, deed of trusts and other loan documents. These documents survive foreclosure and the terms are still enforceable as a contract even though you no longer posses the collateral. The only way to eliminate this type of liability is to file for bankruptcy.
Note: This is not a legal advice.