Financial Peace of Mind

Judgments: Discharging in bankruptcy, negotiating settlement, vacating

Resolving Judgments

Options for Resolving Judgments

People often ask us how to resolve old judgments.

They are right to be concerned– judgments in California accumulate interest at 10% per year, and can be renewed by the judgment creditor every 10 years. 

What started out as a small judgment can quickly become a large one.

Sometimes the judgment has led to a bank levy or wage garnishment.

Often the person did not even know there was a judgment entered against them. 

Sometimes a judgment lien has been recorded against the person’s home and they need help removing the lien so they can refinance or sell their house.

Depending on the circumstances, you could have several strategies for dealing with an old judgment.

These might include:  (1) Chapter 7 or Chapter 13 bankruptcy, (2) settling the judgment and notifying the court of a Satisfaction of Judgment, and (3) vacating the original judgment under some circumstances.

These options are discussed in more detail below.

Post-Judgment Collections

Can I discharge (wipe out) a judgment in bankruptcy?

Discharging Judgments in Chapter 7 and Chapter 13 Bankruptcy

People are sometimes shocked when we tell them judgments can be discharged in bankruptcy just like any other unsecured debt.

Even real estate title companies are confused by this. We probably handle 2-3 phone calls per week from former bankruptcy clients who are buying houses.

Their title companies often think that an old judgment survived the bankruptcy just because it was a “judgment.”

But in California, judgments  can be discharged like any other unsecured debt. This is true if the judgment has not yet been reduced to a lien.

What you do NOT want to do is wait until just before you buy a home to deal with any judgments against you. Your options for resolving the judgment will be much more limited at that time.

Sometimes a person is faced with a wage garnishment or bank levy to pay an old judgment.

That can end up being the incentive they need to “pull the trigger” on a bankruptcy. Often, they can get back previously levied or garnished funds by filing bankruptcy. The bankruptcy can end up paying for itself.

The crisis ends up being a blessing– they discharge all of their debts, get their garnished / levied funds back, and get a completely fresh start.

Give us a call for a free initial consultation.

Courage is knowing what not to fear.

— Plato

Plan of Action

Settling a Judgment

Settle, vacate, or discharge a judgment

Once the creditor has a judgment, there’s nothing you can do, right?

Not exactly. The judgment does give the creditor additional leverage. For example, the creditor can use the judgment to garnish your wages, levy your bankruptcy accounts, and record liens on other assets. 

But, suppose you are currently unemployed or living on social security? It might be difficult for a creditor to collect. 

In many situations, the creditor might be willing to settle with you for less than the total amount of the judgment.

BUT! Be sure to resolve all judgments well before buying or selling a house. Your options become very limited when you are under the time constraints imposed by a home purchase or sale.

In California, judgments accumulate interest at 10% per year and can be renewed every 10 years. So, you don’t want to ignore an old judgment. It is likely to follow you for the foreseeable future unless you resolve it.

We can help you negotiate a reduced payment for an old judgment.

Give us a call for a free consultation.

Post Judgment Options

Vacating a Judgment

Suppose a creditor claims it served you with a summons and complaint in a debt lawsuit. 

Maybe you can prove they did not serve you.

You could have grounds to vacate a default judgment entered against you. 

In fact, there are several situations in which you might be able to vacate a judgment or default judgment.

These are (partially) addressed in California Code of Civil Procedure (CCP) sections 473(b),  473(b), 473(d) and 473.5

Some of the grounds to vacate judgment are very time sensitive. Contact an attorney as soon as you find out a judgment has been entered against you.

If you succeed in vacating the judgment, keep in mind you still have to relitigate the case. 

Give us a call for a free initial consultation.