Will Chapter 13 bankruptcy reduce consent judgment payment?

When you consent to a judgment you generally waive any defenses you could have used. You made payments as agreed, until you couldn’t, and are now stuck with what you have… an aggressive creditor. 

• Who was the judgment creditor/plaintiff?
• Who is the collection attorney/law firm handling this for them?
• How much was the judgment originally for, and what is left owing on it now after the payment you made in the past?

The answers to those questions can help compare the costs and benefits of filing a chapter 13.

Chapter 13 bankruptcy stops collections immediately and can create reasonable and affordable payments.

Chapter 13 bankruptcy results in full or partial repayment to creditors that are part of  the plan. All unsecured creditors are treated pretty much the same, and will get what the trustee says they will get. That could actually be zero in some cases, and on up to 100 percent of what is owed.

Your payments in the plan are stretched out over 3 to 5 years. Most chapter 13 bankruptcies are going to stretch payments out for the full 60 months.

You do get immediate protection from your creditors when you file bankruptcy. That includes protection from judgment creditors.

That protection from creditors does not always come cheap, nor is always advisable. Chapter 13 costs can often be 2 to 3 thousand dollars and higher. You have to conform your budget and expenses to what is set by the bankruptcy trustee. If you have a fluctuating income, or priority expenses that come up, it could mean dropping the plan, and losing court protection, as well as any lower balance pay off benefits if those were part of the plan.

Roughly 2/3 of chapter 13 bankruptcies are not completed. And it is the inflexibility of the plans that leads to much of that. Life happens, as proven by the consent judgment and payments you set up already,that could not be kept up. That same thing could happen with chapter 13 payments.

Why not chapter 7 bankruptcy, or other alternatives?

You have a lien on your home. Do you have equity? Is that equity in excess of the exemption amount allowed in your state for chapter 7? Do you make too much money to qualify for chapter 7 discharge (many judgments are discharged in bankruptcy)?

Chapter 7 is less expensive over all, but it can force liquidation of non exempt assets. And when those assets can be sold to resolve the debts without bankruptcy, it can make more sense.

How many other debts would you roll into the bankruptcy? Are there other debt collections pending or unresolved?

Can you adjust the way you bank and pay bills for a period of time until you save up enough to pay a lumps sum settlement to the judgment creditor? It is possible to settle with creditors for less than the full balance, even in this situation. You may be able to offer them more than they would get in a chapter 13 repayment plan, and certainly quicker. Which are two reason they might go for it.

What state are you in?

I can offer more than general feedback when you post answers to my questions in the comments below.

Anyone reading with an interest in how chapter 13 bankruptcy can protect you from creditors, and force them to accept the amount of money the court tells them they are going to get, or why you may want to look at alternatives, is welcome to post about that in the comments.