Debtor goes Bankrupt
Q: What if my debtor goes bankrupt while
you are enforcing my judgment?
A: The Judgment Enforcer (JE) will almost certainly
let you know if the debtor files for bankruptcy.
Neither JudgmentBuy or most JEs are lawyers -
but we all know that filing
bankruptcy means no creditor or
JE can do anything without first
getting the permission of the bankruptcy court.
If the debtor is really poor -
JEs give up as nothing can be done.
If the judgment debtor's bankruptcy attempt
is successful - it's over. (If you request, the JE will
likely return the now worthless judgment
back to you.)
If the debtor has assets - the JE will likely file
a creditor's claim
(which means they may eventually collect something.)
If the debtor has
lots of assets or is a fraud (and the judgment
is big) - the JE may decide to attempt court
actions to recover money on the judgment.
(This is not easy or cheap.)
If a creditor petitions the bankruptcy court to
re-open the bankruptcy
case and cannot prove assets were hidden or
omitted, they are probably
going to have to pay for the debtor's attorney bill.
There have been cases where a judgment debtor
got their bankruptcy petition
approved, but never put a certain bank account of theirs
on their bankruptcy
schedules - and a judgment creditor levied
on it because they had a prior
lien on their personal property.
The debtor's lawyer challenged him but the BK court
ruled at least a few cases, that it was
abandoned property not part of the
bankruptcy estate. This is risky, as
some judge or trustee might charge the
creditor with violating the debtor's
BK stay and charge them huge sanctions.
JEs always consider bankruptcy when enforcing judgments.
Especially if a debtor communicates
with them - JEs do not push them into bankruptcy.
Once in a while forcing a debtor to file for bankruptcy both
makes sense and is a last resort.
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