- A judgment creditor is typically an unsecured creditor who has filed a lawsuit against you and obtained a court order allowing him to collect the debt. In some states, judgment creditors can perfect liens against your personal property or garnish your wages immediately after obtaining a judgment. In other states, however, they must obtain writs of execution before they can seize your assets. Most states publish laws regulating the types of assets judgment creditors can take, as well as the percentage of your income that is subject to garnishment.
- When you file bankruptcy, an automatic stay immediately goes into effect. Under this court order, creditors must stop all efforts at collection regardless of whether they have judgments, perfected liens or garnishment orders. If the sheriff still has your recently garnished wages or seized property, he typically turns it over to the bankruptcy trustee when the automatic stay becomes active. If you can show that assets the creditor has already taken fall under your bankruptcy exemptions, you may be able to recover them.
- In bankruptcy proceedings, secured creditors have more rights than unsecured creditors. Secured creditors are entitled to the lesser of the full amount of their debt or the value of their collateral, while unsecured creditors receive only a percentage of your settlement amount. However, the court considers creditors with judgments to be secured creditors, regardless of their original status.
- Under the Bankruptcy Code, you can file to avoid some liens perfected by judgment creditors in bankruptcy, even if the liens would be valid outside bankruptcy proceedings. If you invalidate these liens, the creditor becomes an unsecured creditor with fewer rights. However, you can't invalidate the liens of creditors collecting student loan debt, tax debt or any debt incurred through fraud, nor can you discharge these debts in bankruptcy.
About Judgment Creditors
Automatic Stay
Judgment Creditors in Bankruptcy
Considerations
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