27 Aug Can Anything Be Done About Judgments in Georgia Bankruptcy Case Filings?
Will it do any good to file a bankruptcy if a a judgment has already been entered against you? Despite the misinformation you may hear, you may absolutely file a bankruptcy after a judgment has been entered. In fact, filing a bankruptcy following a judgment will create an automatic stay prohibiting the judgment creditor from taking any action to collect that judgment. “Any action” includes phone calls, wage garnishments, bank account levies, or placement of liens.
However, simply filing a bankruptcy as a response to a judgment may not be enough. In Georgia, where I practice, a court issued judgment functions as a lien against everything you own – including personal property, real property, and your future income (wages).
In a bankruptcy context, I deal with judgment liens by filing a Motion to Avoid Lien pursuant to Section 522 of the Bankruptcy Code. When granted, a “522 Motion” strips away the judgment lien, and transforming the resulting debt from a secured debt to an unsecured debt. The Motion to Avoid Judgment Lien procedure is part of the Bankruptcy Code, meaning that these 522 Motions may be filed in bankruptcy cases in States other than Georgia.
If, for example, you had a judgment lien in the amount of $20,000, and you filed a Chapter 13, the $20,000 would be considered a secured debt and would be set up by the Chapter 13 trustee to be paid in full under the plan. If you filed a Motion to Avoid Lien and stripped away the judgment, that $20,000 secured debt would become an unsecured debt. If your plan called for payment of unsecured debts at 50 cents on the dollar, that $20,000 debt would become a $10,000 debt instantly.
I have filed several Chapter 13 cases where the dividend to unsecured creditors was 5% or 10%. In those cases, that $20,000 debt would turn into $1,000 or $2,000.
Motions to Avoid Judgment liens may also be filed in Chapter 7 cases, where they have similar utility of stripping away a judgment lien that would otherwise survive a Chapter 7 discharge (although the lien might not be fully enforceable post discharge).
Filing a Motion to Avoid Judicial Lien can be tricky, especially in the Northern District of Georgia, where I practice. Several of the judges here have their own forms and rules for filing these Motions so your lawyer needs to be familiar with the specific practice of the judge assigned to your case.
Jonathan Ginsberg, Esq.
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