Default Judgement in Chapter 13

Collection efforts from debt collectors may have become so overwhelming that you chose to ignore them altogether, including lawsuits. As a result, you now have a default judgment against your name and creditors can now take more aggressive collection efforts to have you pay your debts.

A default judgment will only place more strain on your financial situation. Contact a bankruptcy attorney to explore your options. You may be able to have the judgment removed if you file for Chapter 13 bankruptcy. 

Bankruptcy Attorney in Dallas County

The internet will not provide you with enough information to remove a default judgment. Your best course of action is speaking with a bankruptcy attorney. Linda Littlefield has been representing consumers and small businesses in bankruptcy matters for nearly 25 years. She will evaluate your financial situation and do everything in her power to have the judgement removed.

Call (972) 812-0900 to schedule a time to speak with Littlefield Law Firm. We assist clients with bankruptcy and related issues in Dallas County, Collin County, Rockwall County and Kaufman County.

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Does the Automatic Stay Stop a Default Judgement? 

Most debtors who are sued by creditors fail to respond to the suit. As a result, a judge will rule in favor of the creditor and enter a default judgment against the debtor. Litigation is typically a last-ditch effort for creditors to collect overdue debts. If the creditor is successful, they can garnish wages, freeze bank accounts and instill liens on property. 

By filing for Chapter 13 bankruptcy, you may be able to take advantage of the automatic stay and prevent creditors from taking any further collection efforts. The best course of action is to file for bankruptcy before a judgment is filed, but the automatic stay can still protect a debtor once the judgement is in place. 

An automatic stay is a court order that prevents creditors from collecting debts. This means your bank account will be unfrozen and your wages will no longer be garnished. Protection from the automatic stay will go into effect immediately after you file for Chapter 13 bankruptcy. It may take a day or two for creditors to catch wind of your filing, but once they are notified, they can no longer contact you. Doing so is a violation of federal law and may warrant prosecution.

This injunction will not protect debts and judgments incurred after you filed for bankruptcy; only those included in the bankruptcy petition. Also, not all debts are protected by the automatic stay. Debt collectors can still enforce their judgment on debts such as backed child support, alimony and restitution from criminal proceedings.

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Will Chapter 13 Bankruptcy Discharge a Default Judgement?

Chapter 13 bankruptcy may be able to discharge certain debts subject to a judgment once a payment plan expires. Most unsecured, non-priority debts will be discharged unless a creditor or trustee can prove the debt was obtained from fraud. Unsecured, non-priority debts that are commonly discharged include:

  • Credit card bills
  • Personal loans
  • Medical bills
  • Utility bills
  • Past non-priority income taxes
  • Debts from divorce proceedings
  • Debts from malicious damage to property
  • Loans from a retirement account
  • Debts used to pay non-dischargeable tax obligations
  • Debts from a previous bankruptcy that was denied discharge
  • Certain fines and penalties owed to the government, not including criminal fines and restitution

Most debts that are not paid off by the end of a Chapter 13 repayment plan will be discharged, but there are a few you will still be obligated to pay. Unless the debt is paid off, a default judgment will remain intact for student loans, child and spousal support, home mortgages, criminal fines and restitution obligations and drunk driving liabilities.

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Judgment Liens and Chapter 13 Bankruptcy   

Debts with an attached lien will be classified as a secured debt. These debts are given top priority in the bankruptcy plan and are typically the first to be paid off.

However, you can reduce the principal balance on liens through a cramdown or lien stripping. The debt will be divided into a secured and unsecured portion. You will be obligated to pay the secured portion but through a cramdown you may be able to reduce how much you pay back with the permission of the court even if the creditor objects. The remaining balance of the unsecured portion will be discharged at the end of the plan. Speak with an attorney to see if you qualify to cram down a secured debt. 

Lien stripping is a process that allows you to eliminate a junior lien on your home. To qualify, the balance of the first mortgage must exceed the value of your home. A junior lien is treated as an unsecured debt and will be discharged when you receive discharge. 

Removing judgment liens is a complex issue that goes far beyond the scope of this article. Speak with a bankruptcy lawyer to explore your options.

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Additional Resources

How to Set Aside a Default Judgment – Learn how you and your attorney can remove a default judgement by following the link. You can find out if your situation qualifies, how long you have to file and how to ask the court to vacate the judgement.

Chapter 13 | United States Code – Read the section of the United States code governing Chapter 13 bankruptcy. You can learn about your powers and rights as a debtor, the role of a trustee and find information about the repayment plan. The information is provided by the Legal Information Institute, an online legal resource provided by Cornell Law School.

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Bankruptcy Lawyer in Dallas    

Do not try to cut cost by handling your bankruptcy on your own, especially if there is a default judgment against you. Littlefield Law Firm understands you are in a financial bind, which is why we strive to provide quality legal representation at a price that fits your budget.

Take advantage of our free consultation. Call (972) 812-0900 to speak with a bankruptcy lawyer. Littlefield Law Firm assist consumers and small businesses in areas such as Dallas, Plano, Heath and Rockwall.

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