Say, are judgements discharged in Chapter 13? I have some friends who are in BK 13 now. I think this is the story, as best I understand it. They had a judgement for an apartment rental about 3 years ago. (Didn't break the lease, but landlord claimed $900 in damages for new carpet and such. It went to court. It was served properly and landlord won default judgement because they didn't respond. Too scared, I guess.) 3 weeks ago, lawyers filed for garnishment of their checking account. Friends got it released because of the "automatic stay". My friends didn't list the judgement on the BK13, but they wrote the lawyer a CRRR letter citing the BK case number and their automatic stay rights. That did the trick for now and their funds were released. Seems to me I recall reading somewhere that most judgements are discharged in BK (except for IRS, fraud, child support and maybe student loans). Just seems fishy to me that the lawyer dropped the garnishment right away and didn't pursue attacking their BK13 (it's still in automatic stay phase and hasn't even had it's first creditor's meeting. A fact that should have been for that lawyer to ascertain). If the lawyer had a leg to stand on, wouldn't he file as a secured creditor or something now that he knows about their BK13? Or is he hoping they don't add him to the list of creditors so he can go after them when the BK13 is discharged later? They're scared to mention this to their own lawyer as they say they flat out forgot about the 4-yr old judgement and don't want their BK dismissed by divulging it now. I'm no lawyer, so I don't know what to tell them. I found something on Nolo.com that says most judgements are discharged in BK13 (with the above exceptions) even if the creditor is not listed on the matrix, so long as the person who filed bankruptcy can prove that the creditor knew about the BK13 by other means (such a being informed via the CRRR letter my friends sent to the lawyer to make him release their checking account.) I don't want to give them false hope, but my thinking here is "asta la vista" to that judgement. Anybody know? (they're in Texas.)
Good God! People can't be this dumb! You hire a lawyer and you don't give him the full story? The other side's lawyer is doing nothing sinister-he's just obeying the law! Your friends need to tell their lawyer the full story and will be pleasantly surprised to hear that you may amend a bk petition up until the date the bk is discharged or, in a 13 plan, it may be amended continusouly. This might be a nice time for your friends to give the lawyer the entire story and get it done right the first time.
I've learned alot about bankruptcy recently because of my own filing in February. The lawyer filing the garnishment and the person he represents are not "secured" creditors unless they have a lien on property that your friend has. They cannot pursue your friend unless they file for relief of stay, which is unlikely unless they feel like some fraud was commited. The stay prevents them from garnishing your friends wages or taking other actions to collect unless they receive a relief from stay.
So you're saying a judgment is not the same as a secured creditor? This is my thinking, too. And why DIDN'T he file for relief from stay now that he's found out about the BK? Is the lawyer afraid, he wouldn't get the relief? Even if that maybe so, what does the lawyer have to loose? Or is he trying to lull my friends into a false sense of security, then go after them again once the BK is discharged?
You file for relief of stay if you are a secured creditor and believe the bk petitioner is using the stay to delay the inevitable foreclosure or repo. You and your friends are trying to overthink this thing and come up when some convoluted conspiracy theory when the real simple thing to do is call the lawyer and say, "we goofed. There is one more party we need to add to the petition". Real rountine. It won't shock anyone involved in the case.
Cool, I get what you're saying Keepmine and I have as much as told them to just tell their lawyer they goofed. But I'm still curious about my original question (and I think this is why they're are hesitating, too): Can that judgement be discharged in this bankruptcy as an UNSECURED debt withou them having to pay it? Or will the judgement survive the bankruptcy (since the judgement was prior to their BK)?
Hope, If they don't list it on the bk petition, 3 things can happen and 2 of them are bad. First of all, other creditors may claim they are giving one creditor preferential treatment at the expense of the rest of the creditors. Secondly, the lawyer for the apt complex can just say or do nothing and note when your friends are due to be discharged from the 13. He'll be sure the judgement is renewed if needed and when the 13 is discharged, he can move to enforce the judgement. Or finally, the lawyer forgets about and the other creditors don't care and it disappears. As to Nolo's comments-I wouldn't make book on how accurate that advice is. It sounds OK in theory but, if the creditor pressed the issue, they would need to convince a state court judge. You got another court appearence and, this judge may have a far different opnion than Nolo.
P.S. In a chapter 13, the apt complex claim is lumped in with the rest of the unsecured debt and repaid on the same percentage basis as everyone else in that class of creditors.
Your friend needs to tell their lawyer, as far as this is concerned it is not a big deal as they will simply add it into the bankruptcy, but if they don't include it in the bankruptcy, you can nearly guarantee that this creditor will come after his money. No a judgement is not a "secured" debt, it just gives the individual who obtained it the right to continue pursuing the debt via garnishment, levy, etc. but Your friend MUST TELL THE LAWYER!!
A relief of stay is not generally granted unless there is reason to believe that the debtor has commited some sort of fraud. Chapter 13 allows you to reorganize your debts and repay a certain amount, after which the bankruptcy is discharged.
Hope, I've reread the thread and I'm confused . Are you sure your friends are filing Chapter 13 as opposed to a Chapter 7? In a 13, unsecured debt is repaid at a percentage of what is owed over a 36-60 month period. A judgement as you described it would belong in this class and be repaid on the schedule arranged. In a 7, all unsecured debt is wiped out and, this would include a judgement. You file a 13 if you have assets to protect and/or your income is high enough to repay a portion of your debt over time.
