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Can I still discharge a debt in bankruptcy if the creditor gets a NJ judgment against me?

Yes, you can.  Many clients come to me, after having been sued by one or more of their creditors, concerned that it is too late to do anything about that particular debt.   I would have to say, though, that in the vast majority of cases, a debtor can still wipe out that debt, even if a judgment has been entered.   A complication can arise, however, for a debtor who is a homeowner.

Best to File Before Judgment is Entered

Once you file for bankruptcy protection, creditors are barred from taking any action against you. If they sued you, but a judgment has yet to be entered, then they cannot now do so without asking the bankruptcy court first. In this situation, that creditor is treated just like any other unsecured creditor.  If you do not own any real estate, even the entry of a judgment does not create issues in and of itself.

Homeowners Beware of Judgments

For homeowners, however, a judgment may change things.  This is because the judgment creates a lien on any real estate that you may own in New Jersey.  In this way the debt can go from an unsecured debt to a secured debt through a judgment lien. That is the bad news.  The good news is that in many cases, if you do not have a lot of equity in the property, the judgment lien can be avoided.

The obvious lesson here is that waiting too long to file bankruptcy can cause you headaches, from costing you more money to wipe out your debt to facing the possibility of having to pay off a lien.  Realistically speaking, most bankruptcy cases that are filed do not result in assets being sold because most debtors do not have assets over and above what they may exempt.

So What Do I Do?

Creditors suing and getting judgments against you are a sign that your financial situation has gotten out of hand.  If you live in southern New Jersey call my office at 856-432-4113 or contact me through this site to schedule an appointment to discuss your case.

If you are looking for more information on New Jersey bankruptcy, download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.  Don't wait until it is too late!

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