Can You Discharge a Default Judgment in Bankruptcy?

The answer to the question 'Is a default judgment dischargeable in bankruptcy?' is not as straightforward as it might seem. Legislation, case law, and individual circumstances play a significant role. In this article, we will explore how a default judgment can impact a bankruptcy filing and provide clarity on which debts can be discharged.

Understanding Default Judgments

A default judgment is a court ruling in favor of a creditor when the debtor fails to respond to a lawsuit or meet legal obligations. Unlike traditional bankruptcy debts that are eligible for discharge, some default judgments are non-dischargeable and must be addressed outside of bankruptcy proceedings.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, involves liquidating non-exempt assets to pay off debts. In the context of a default judgment, several factors determine whether the judgment is dischargeable:

Dischargeable Debts in Chapter 7

For most debts, including most credit card debts, medical bills, and personal loans, a default judgment can be discharged in a Chapter 7 bankruptcy filing. The process typically involves submitting a bankruptcy petition and waiting for the court to review the filed documents. Upon discharge, the debtor no longer has to pay the debt and creditors cannot legally seek repayment.

Non-Dischargeable Debts in Chapter 7

There are certain types of debts that are not dischargeable under Chapter 7 bankruptcy, including:

Child support and alimony Most student loans Fines and penalties for criminal acts Taxes if the obligation arose from a fraud Judgments for support obligations

Assuming a default judgment does not fall into one of these non-dischargeable categories, it can indeed be discharged through the Chapter 7 process.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows filers to develop a repayment plan to pay back a portion of their debts over a period of three to five years. Unlike Chapter 7, Chapter 13 bankruptcy can discharge certain types of default judgments, but the process is more complex.

Dischargeable Debts in Chapter 13

Under Chapter 13, certain default judgments may be discharged depending on their nature. For instance, if a default judgment stems from a breach of contract, and the debtor can demonstrate they have committed no fraud or willful misconduct, the judgment may be included in the repayment plan and potentially discharged.

The repayment plan proposed by the debtor must be approved by the court, and the judge will review the plan to ensure it is fair and reasonable. If the default judgment does not fall under the non-dischargeable categories mentioned earlier, it can be included in the repayment plan.

Consulting a Bankruptcy Attorney

Given the complex nature of bankruptcy law and the potential for default judgments, it is highly advisable to consult with a bankruptcy attorney. They can review your specific situation, provide expert advice, and guide you through the process. An attorney can also ensure that all necessary documentation is submitted and that your rights are protected during the bankruptcy proceedings.

Conclusion: The dischargeability of a default judgment in bankruptcy depends on several factors, including the nature of the debt, the type of bankruptcy filing, and the specific circumstances of the case. With the help of a seasoned bankruptcy attorney, you can navigate the complexities of the system and achieve the best possible outcome for your financial situation.

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Keyword2: default judgment

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If you are considering filing for bankruptcy and need more information, or if you require legal assistance, you can contact a bankruptcy attorney in your area or visit the website of a reputable legal aid organization for additional resources and support.