In my experience one of the most pressing matters leading people into filing for bankruptcy is collection on judgments.

A vast majority of people, when they receive mail that they don’t want to open, they throw directly to the dumpster. I know I am this way with advertisements and campaign ads. When I used to work in politics our rule of thumb in designing effective campaign advertisements was “What will people see as they walk from their mailbox to their garbage can?” Collection notices are treated in a similar manner.

The problem with avoiding collection notices and bills is that, as much as we would like them to, they will not go away. Throwing them away will most likely lead to one thing- a lawsuit.

When a creditor files a lawsuit in Utah, typically you have 10-20 days to file a response, or an “answer.” If you do not file an answer- then the court will enter a default judgment against you. Once there is a judgment- the creditor then can begin the process of enforcement to take money from you- either through garnishment or execution of your property.

If you own property, then another common collection tool is for the creditor to file a copy of the judgment with the local county recorder. Once that is filed, the judgment actually becomes a lien against your property.

When people get to this point, typically they come in to file for bankruptcy protection. As soon as a person files for bankruptcy, the automatic stay provisions of 11 U.S.C. 362 come into effect and creditors can no longer collect (or enforce judgments) against you or your property (wage garnishments, property foreclosure, etc.)

The bankruptcy discharge, however, does not have any effect on liens against real property. Even though the debt will be eliminated (unless the debt is excepted from the discharge under certain conditions), the lien against the property will remain.

It is important for your bankruptcy attorney to know if there is a judgment recorded against your property- because there is a way out of that lien under Chapter 7. If your property has a mortgage (or two) against it, and your property has no value, then your bankruptcy attorney can file a motion in your Chapter 7 case to avoid the judicial lien against your property. If a judgment lien impairs your right to a homestead exemption (found in 11 U.S.C. 522), then the bankruptcy law allows you to avoid the lien altogether through the filing of a formal motion in conjunction with your main bankruptcy case. Remember- the mere filing of your bankruptcy or the discharge will have no effect on liens against your property. A formal motion MUST be filed as well after the bankruptcy case is initiated.

If you are struggling with creditors and collection – call me. It is much better to jump ahead of the collection process rather than rushing into it. I offer a free consultation to all new clients- so call today and find out your options. Put the law on your side.