So you’ve won your day in court and obtained a money judgment against a defendant. You’ve called the local sheriff and begun an execution of your judgment in order to secure payment of your debt. Just as you begin to think of how much you can collect, you find out that the defendant has filed for bankruptcy. What now?

Unfortunately, this scenario is not uncommon. Many judgment creditors are left holding the bag when a debtor files for bankruptcy protection. But this does not have to happen to you.

Bankruptcy Code

Although the United States Bankruptcy Code (11 U.S.C. § 101 et seq.) was largely written to protect debtors, well-informed judgment creditors can still collect on their judgments. This article will help you understand the issues creditors face by identifying the bankruptcy remedies available to debtors, the actions creditors may take once a debtor has filed a bankruptcy petition, and the treatment of judgments by the Bankruptcy Code.

Debtors can generally file a bankruptcy petition under two separate provisions of the Bankruptcy Code: (1) Chapter 7 (11 U.S.C. § 701 et seq.); or (2) Chapter 13 (11 U.S.C. § 1301 et seq.). Chapter 7 is better known as “clean slate” bankruptcy because under this provision the debtor’s assets are liquidated, creditors are paid with the proceeds, and the debtor is discharged from her debts by the bankruptcy court.

Chapter 13

Under Chapter 13, the debtor enters a court-approved plan to repay a portion of her debts to a bankruptcy trustee. The trustee then divides and disburses that amount  amongst creditors based upon their priority, so that each creditor receives at least some payment. Once the plan is fulfilled, judgment debts in particular are discharged.

The point here is that judgment creditors do have options when facing a bankrupt debtor. First, make sure that you’ve filed your judgment. Second, seek the advice of an experienced attorney. You’ve already gone through the stress of litigation. You shouldn’t have to face the stress of not recovering the judgment the court found in your favor.

For more information, please contact us at info@lawplusplus.com or call (919) 912-9640.