If you’re considering filing for bankruptcy to get out from under a mountain of debt, it’s critical to understand what kinds of debts can and cannot be discharged in bankruptcy. One area that can be confusing is legal judgments.
There’s no one answer to whether a judgment (a court order to pay money) can be discharged. A discharge releases the debtor from responsibility to repay what they owe. It depends on the type of judgment as well as the nature of the debt.
Judgments in creditor lawsuits
Sometimes creditors, such as banks and credit card companies, will file a lawsuit to collect on a debt owed to them. Landlords and even friends or family members can seek a judgment to get money they’re owed.
Whether these debts can be discharged depends, as we noted, on the nature of the debt. For example, debts for personal loans, credit cards and rent are typically dischargeable. However, student loan debt currently is generally not dischargeable. Mortgage debt isn’t dischargeable because it’s secured by the home, which can be taken via foreclosure. Some past tax debt can be discharged, as long as it isn’t associated with tax evasion or fraud.
That brings us to other types of judgments that may not be dischargeable.
Judgments related to criminal activity or injury
Judgments related to criminal activity, including fraud, are not dischargeable in bankruptcy. Civil lawsuit judgments for “willful and malicious” injury or damage to a person or property are typically not dischargeable. Other civil judgments may be. These things are considered on an individual basis.
Pending lawsuits where a judgment is sought are suspended if the defendant files for bankruptcy. They’re often, but not always, dismissed or withdrawn.
One final note: Spousal and child support payments cannot be discharged in bankruptcy. However, if you’re not able to pay the amount ordered by the court, you can seek a modification of the amount owed.
Each person’s situation is unique, as is each judgment. That’s why it’s important to have sound legal guidance as you decide whether bankruptcy is the right decision for you.