Bankruptcy Tricks

A debtor applying for bankruptcy protection is almost the worst judgment recovery show stopper a judgment creditor can face. As soon as you find out that the judgment judgment debtor has applied for bankruptcy, you need to cease all judgment and debt collection actions. My articles are my opinions, and is not legal advice. I'm a judgment referral expert, and not an attorney. If you ever need a strategy to use or legal advice, you should contact an attorney.

After a person or entity files for bankruptcy protection, the automatic protection stay starts. An bankruptcy automatic stay applies to any of a debtor's known (and perhaps even unknown) debts, including any lawsuits or judgments which starts before their bankruptcy filing. The debtor's automatic stay prohibits any collection actions against the debtor or their assets. When a debtor files for bankruptcy protection, it's illegal to even make a telephone call, asking your debtor about about any of their debts or judgments. .


The automatic bankruptcy stay is completely automatic. It begins at the time and date of the filing of the bankruptcy petition. An automatic stay doesn't rely on a judge's order, for the bankruptcy stay to begin immediately. When anyone, including a judgment creditor, willfully violates a debtor's automatic stay, they could be found to be liable for lawyer's fees, damages, and perhaps also punitive damages.

In community property states, an automatic stay usually also stops a judgment owner from their goal of the recovery of a judgment against the community property assets of the judgment debtor's spouse. If any judgment owner thinks that their debtor has filed for bankruptcy; they should stop any judgment recovery or debt collection actions, until they can verify that a bankruptcy filing hasn't occurred.

The automatic stay begins at the moment of the debtor's bankruptcy filing, whether it is a chapter 7, 9, 11, 12, or a chapter 13 bankruptcy proceeding. The stay remains in effect until the bankruptcy proceeding is closed, dismissed, denied, or until the discharge of the debtor's debts is granted. If your debt or judgment is discharged in the debtor's bankruptcy, it's time to quit, your debt or judgment is dead.

Although there are certain judgment debts which might eventually survive a filing for bankruptcy protection, one must still honor all automatic stays for as long as it is active. The automatic stay usually lasts as long as the bankruptcy court case is still proceeding. If a creditor files their adversarial action, and a bankruptcy judge signs an order, the creditor may get a leave of the automatic stay, and be allowed to recover the debt or judgment, and other creditors won't be allowed to recover from the debtor.

Bankruptcy is usually fatal to the enforceability of judgments, so it's the number one enemy of any judgment recovery. When you think your judgment debtor will or has filed for bankruptcy protection, it is a good idea to check the bankruptcy situation prior to every step, using PACER; the government's Federal Court web site. PACER is really cheap, and almost a must for everyone who recovers debts or judgments.

Bankruptcy is so scary, it is abused by debtors to trick creditors. For every 3 debtors who threaten to go bankrupt immediately, one actually does. Bankruptcy is so scary that many creditors don't verify the bankruptcy filing, they just walk away.

Another trick some debtors use, is to apply for bankruptcy protection, but not actually follow through with their case. They simply file so that they can get their automatic stay. Many creditors presume the starting a bankruptcy automatically means that their money judgment gets automatically discharged, yet that only happens after the judgment debtor's bankruptcy successfully concludes and a court orders that. That's another reason to get and use a PACER account.

Judgment owners should be aware about their judgment debtor's bankruptcy court proceedings. If their debtor's bankruptcy case gets dismissed, dropped, or denied, the judgment owner can then start up the judgment enforcement machinery once more.

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