When facing a lawsuit over unpaid debt, many people wonder when they should file for bankruptcy. Is it better to file for bankruptcy before a judgment is entered or wait until after the court has ruled? The timing of a bankruptcy filing can significantly affect how much protection you receive, what assets are at risk, and how complicated the case becomes.
The best time to file for bankruptcy depends on your specific financial situation. Filing too late can expose you to unnecessary liens and collection actions, while filing too early without proper planning can lead to missed opportunities to protect assets. Understanding the timing can help you make a more informed decision and avoid long-term financial consequences.
Filing Bankruptcy Before a Judgment is Entered
Filing for bankruptcy before a judgment is issued is often the most strategic option. Once a bankruptcy case is filed, the automatic stay goes into effect immediately. This powerful legal protection stops most collection actions, including pending lawsuits, wage garnishments, bank account levies, and creditor harassment. If a lawsuit is already underway, the automatic stay pauses the case and prevents the creditor from obtaining a judgment against you.
By filing before a judgment, you may also prevent the creation of a judgment lien. Judgment liens can attach to real estate or other property and remain in place even after the underlying debt is discharged. Avoiding a judgment lien altogether can preserve your equity, protect your credit more effectively, and reduce post-bankruptcy legal issues. In many cases, filing early results in a more straightforward bankruptcy process.
Filing Bankruptcy After a Judgment Has Been Entered
Filing for bankruptcy after a judgment is entered can still provide meaningful relief, but it often comes with added complexity. Bankruptcy can discharge many types of judgment debts, including those based on credit cards, medical bills, and personal loans. The automatic stay will also stop further collection efforts, such as wage garnishments and bank levies, once the case is filed.
However, if the creditor recorded the judgment as a lien before the bankruptcy filing, that lien may survive the bankruptcy even if the underlying debt is discharged. This means the creditor may retain an interest in your property, limiting your ability to sell, refinance, or transfer it without addressing the lien.
Key Factors That Affect Timing
Several factors influence whether filing before or after a judgment makes sense. These include the type of debt involved, whether the debt is secured or unsecured, the stage of the lawsuit, and the assets you own. State exemption laws also play a critical role, as they determine how much property you can protect and whether a judgment lien can be avoided.
Contact Us Today
When it comes to bankruptcy, timing is everything. If you are being sued for a debt, act quickly.
Count on The Law Offices of Adam M. Freiman to help you protect your legal rights during a bankruptcy. You do not have to go through this alone. Fill out the online form or call (410) 486-3500 to schedule a consultation with our office.
