When you file for bankruptcy in Los Angeles, the court will most likely discharge almost all your debts. However, there are certain types of debts that bankruptcy cannot discharge.
Most people who receive civil judgments against them may decide to file for bankruptcy to have their debts discharged and to prevent their creditors from securing a lien on their property. It isn't quite easy to discharge a civil judgment unless you obtain professional legal help from a competent and well-experienced bankruptcy attorney.
We at the Los Angeles Bankruptcy Attorney have extensive experience in helping individuals obtain debt relief. Get in touch with us if you would like to receive a discharge on your civil judgment or just a general discharge from your debts. We will discuss with you the best steps to take to solve your debt issues.
The Legal Definition of Bankruptcy Discharge
The term ‘bankruptcy discharge’ means a court order, which is permanent, whose primary purpose is to release a debtor from his/her debts. Some attorneys may use the terms ‘discharge’ or ‘discharge in bankruptcy’ to refer to a bankruptcy discharge.
When the court issues a bankruptcy discharge, the debtor will not have a legal obligation to pay his/her debts. Moreover, a bankruptcy discharge order restrains creditors from pursuing or contacting debtors for their outstanding debt.
How Does a Bankruptcy Discharge Work?
You will obtain a discharge if you successfully file for bankruptcy. The court normally considers various factors before granting a bankruptcy discharge.
If you file for chapter 7, the court will issue a discharge within four months from the date when you filed the petition. On the other hand, you will only receive a discharge for chapter 13 after you have completed all your payments as per the schedule. This is usually between 3 – 5 years.
Note that you will not receive a discharge on all your debts. As per California’s bankruptcy laws, the court cannot discharge some specific types of debts.
Often, the judge will issue the discharge order automatically after you have filed for bankruptcy unless some creditors raise objections. The court clerk will mail copies of the discharge order to your creditors. This ensures that your creditors will not pursue you or contact you to pay outstanding debts. If they persist in their collection efforts, law enforcement may subject them to punishment for contempt.
Bankruptcy Dischargeable and Non-dischargeable Debts
As per the US Bankruptcy Code, certain types of debts are dischargeable while others are non-dischargeable. Generally, you can discharge almost all kinds of debts when you file for either Chapter 7 or Chapter 13, unless if the debts are categorized as non-dischargeable by the US Bankruptcy Code.
Bankruptcy can discharge the following debts:
- Credit card dues (including late and overdue fees)
- Veterans assistance overpayment and loans
- Collection agency fees
- Social security charges
- Medical bills
- Personal loans given by employers, friends, or family members
- Revolving charge account
- Utility bills
- Attorney fees
- Dishonored checks
- Civil suit judgments
- Student loans
- Repossession deficiency charges
- Money owed to a creditor as per lease agreements
- Car accident claims
- Business debts
Note that the court will discharge only the debts that you had before you filed for bankruptcy. Debts that you incurred after you have filed for bankruptcy cannot qualify for a discharge.
According to the US Bankruptcy Code, there are 21 types of debts that the court cannot discharge when an individual files for bankruptcy. You will never receive a discharge on tax liens, alimony, debts obtained via fraudulent activities, debts for wrongful death or willful injury, monies loaned to you because of a fiduciary relationship with another person, and court fees.
Though student loans can be dischargeable, you will have to demonstrate that you are experiencing undue hardship, which is permanent or will last for a long duration. Moreover, some creditors can convince the court not to discharge certain types of debts.
Discharging Civil Suit Judgments
Civil suit judgments are dischargeable in bankruptcy proceedings. Most individuals believe that if a judgment is entered against them, and they haven’t yet filed for bankruptcy, the judgment will automatically become a lien, making it non-dischargeable. This belief is false. Although a judgment can be converted into a lien and become non-dischargeable, the court usually considers the facts and circumstances of your situation, including the creditor's actions, in determining whether or not to discharge the civil suit judgment.
If you successfully file for chapter 7, the court will discharge your unsecured debts. The term ‘unsecured debt’ refers to any type of debt that isn’t attached to a particular property, such as credit card dues.
A lien attaches to a specific piece of property, announcing to the world that you owe an individual or organization money. This individual or organization can collect this particular piece of property if you don't pay your debts. A lien turns an unsecured debt into a secured debt. Generally, bankruptcy proceedings cannot discharge secured debts, although your attorney can use various tactics to eliminate a lien.
California court judgments do not necessarily confer a lien on what the defendant owns. Since a judgment doesn’t confer a lien, the debt remains to be unsecured, and the court can discharge it in a bankruptcy proceeding.
However, a judgment document, such as a notice of judgment lien or an abstract of judgment, can confer a lien on the assets of the judgment debtor. When a creditor records the document, an automatic lien will be created on your property. If you are in such a situation, you have a high risk of losing your property. Therefore, you should contact a bankruptcy attorney as soon as possible to protect your property.
Bankruptcy Dischargeable and Non-Dischargeable Civil Suit Judgments
Most civil suit judgments can be discharged. The court will mainly look at the nature of your debt before deciding to issue you a discharge.
Civil suit judgments entered against you for credit card debt, mortgage, or car loan can be discharged. You can also receive a discharge for your personal loans and medical bills.
Some civil suit judgments cannot be discharged. For instance, if the judgment arose from alimony or child support, or criminal fines, the court will not issue you a discharge. Additionally, if you entered into debt because of fraud, false pretenses, or misrepresentation, you will not obtain any relief if you file for bankruptcy. Likewise, a civil suit judgment of a debt arising from an accident that you caused because of intoxicated driving or any other willful or malicious actions cannot be discharged in a bankruptcy proceeding.
How to File for Bankruptcy to Discharge a Civil Suit Judgment
If you’ve made up your mind to file for bankruptcy to discharge a civil suit judgment, you should consider several options. First, you should decide if you would like to hire a bankruptcy attorney to assist you in obtaining relief, or you would want to represent yourself. However, it is recommended for you to hire an attorney since filing for bankruptcy involves complex paperwork that you may find difficult to understand. Whichever option you choose, these are the steps you should take when filing for bankruptcy to discharge a civil judgment:
1. Credit Counseling
According to the US Bankruptcy Act, all debtors who would like to file for bankruptcy must complete a credit counseling class. Most credit counseling classes are usually 90 minutes long, and you can complete them online or via your phone.
You should complete the credit counseling class within six months before you file for bankruptcy. We advise you to complete the program only when you intend to file for bankruptcy. This is because if the credit counseling program certificate expires, you will be required to retake the class.
2. Means Test
You will have to take a means test to find out if you can file for chapter 7 or chapter 13. The court will analyze your mean income, in comparison to California’s median income. If the median income is above your mean income, you will be permitted to file for chapter 7. On the other hand, if your mean income exceeds California’s median income, the court will solely determine if you have qualified for chapter 7 or if you should apply for chapter 13.
3. Compiling Paperwork
You will need the following documents to file for bankruptcy:
- Six-months income verification documents or pay stubs
- Filed tax returns for the past two years when applying for chapter 7, or the past four years when filing chapter 13
- Creditor information, including their addresses and the total amount you owe them
- Asset information, including life insurance schemes, bank accounts, IRA, retirement, 401K, and vehicle value
- Proposed payment plan, if filing for chapter 13
If you have hired a bankruptcy attorney, he/she will request you to present these documents to him/her. The information derived from these documents will be used to fill in your bankruptcy petition and schedule.
4. Complete Schedules and Petition
You will have to complete various schedules and a petition, and then file them at the courthouse. You should file these documents at a court within an area where you have been residing for the past 180 days.
Make sure that you are sincere and accurate when completing your schedules and petition. If you lie about any fact, the California Department of Prosecution can charge you with the criminal offense of perjury.
A bankruptcy attorney can fill out and file these documents on your behalf. You will also be required to pay filing fees. Currently, the court fee for filing for chapter 7 is $306, while that for chapter 13 is $281. You can apply for a waiver of the court fee if you would like to file for chapter 7 bankruptcy.
5. Automatic Stay
What will immediately come into effect after filing your bankruptcy application is an automatic stay. The primary purpose of an automatic stay is to ensure that your creditors do not pursue their debt collection efforts, or stake a claim on your property after obtaining a civil suit judgment against you. Generally, an automatic stay stops any proceedings of foreclosure.
6. Bankruptcy Trustee
After you have filed for bankruptcy, the court will appoint a trustee who will assume control over your non-exempt property and debts. The primary role of a bankruptcy trustee is to ensure that a majority of your creditors receive payments for their outstanding amounts. A bankruptcy trustee will review your documents thoroughly and particularly analyze both your exempt and non-exempt property. Also, he/she may require proof of any element in your bankruptcy application.
7. 341 Creditors’ Meeting
Approximately 30 days after you have filed for bankruptcy, the trustee will convene a creditors’ meeting, in which you will be required to attend. This creditors’ meeting is also referred to as a 341 meeting.
It is quite rare for a creditor to be present in a chapter 7 meeting; a few of them would probably be present in a chapter 13 bankruptcy meeting, especially if they would like to question certain aspects of your payment plan. The creditors can raise various objections, which your bankruptcy attorney can quickly resolve. If there is no agreement reached, the court will intervene.
Typically, 341 meetings last around five minutes. You will be notified of the meeting’s venue as well as the scheduled time.
8. Debtor Education Program
The court will require you to complete a debtor education program after you have filed for bankruptcy. When you have completed the program, you will have to file with the court a B23 form. Generally, this form is mailed to the bankruptcy applicant by the court, and you should fill it out upon completion of the debtor education program. If you don’t file a B23 form, the judge will not issue you a discharge.
9. Discharge Order
If you follow all these steps, you will obtain a discharge order. Sometimes, the court may require you to complete a few additional steps, depending on the nature of your situation, including adhering to your payment plan if you have filed for chapter 13.
Overall, don't risk your future by attempting to file for bankruptcy by yourself. A bankruptcy attorney has the technical know-how to enable you to obtain a discharge from most of your debts and secure financial relief.
The Legal Effect of Discharge Judgments
If a creditor has obtained a civil judgment against you, he/she will look for various ways to enforce it. For instance, he/she may freeze your bank accounts, apply for wage garnishee proceedings, and even place a lien on your property.
When you file for bankruptcy, an automatic stay will immediately come into effect. This stay will stop any attempts by the creditor to collect outstanding amounts and give you some breathing space. If the court discharges your civil suit judgment, the judgment creditor will not have any claim against you whatsoever.
Removing Judgment Liens in Bankruptcy
If the judgment creditor has already created a lien on your property, you can still remove it during bankruptcy proceedings. However, you must be able to meet specific requirements.
According to the US Bankruptcy Code, the court can discharge a lien if the debtor proves that it has impaired an exemption to which he/she could have been legally entitled. This involves some calculations and certain considerations such as the total value of your assets, how many liens have been created on your property and when they attach, and the number of available exemptions.
You should get in touch with a bankruptcy attorney if you believe that your creditor has already created a lien on your property. He/she will thoroughly analyze your situation and inform you whether or not it is possible to remove the judgment lien.
Filing for Bankruptcy to Stop Debt Collection Lawsuits
You may be advised to file for bankruptcy to stop debt-collection lawsuits. However, how bankruptcy affects a debt collection lawsuit depends on the nature of the civil suit and the type of debt you owe.
Immediately you file for bankruptcy, an injunction or automatic stay comes into effect. This injunction prevents all creditors’ activities from pursuing their outstanding amounts. However, a creditor who would like to continue with the debt collection process may ask the judge to lift the injunction. Other creditors may initiate several lawsuits outside the bankruptcy court.
A creditor can opt to suspend a pending lawsuit and entirely rely on the outcome of the bankruptcy court. However, the automatic stay has the power to stop all pending debt-collection lawsuits.
Your attorney can file a document commonly referred to as a ‘suggestion of bankruptcy’ in the pending lawsuit. This document informs the judge that the debtor has initiated bankruptcy proceedings. Then, the judge will cease all the activities in the pending civil suit, until the debtor obtains a discharge. It is quite common for a state court judge to dismiss the debt collection lawsuit once the bankruptcy court has issued a discharge.
Find a Los Angeles Bankruptcy Attorney Near Me
The Los Angeles Bankruptcy Attorney is here to help you file for bankruptcy to discharge a civil judgment. We also offer various debt relief options. Call us today at 424-285-5525.