Will Chapter 13 bankruptcy reduce consent judgment payment?
With a consent judgment, does the original creditor have to accept a negotiated amount if I file Chapter 13? I was making payments but I defaulted and the consent judgment said they could pursue any legal action. I have a lien on my home and a freeze on my banking accounts as a result of the original creditor filing another suit.
Can a consent judgment amount be reduced in Chapter 13 in Georgia?
—Katie
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.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
‘All unsecured creditors are treated pretty much the same, and will get what the trustee says they will get.’
–but about secuerd credits ? i have an unsecured cc debt that is now in an attny’s office an the latter is threatening me with a judgment and he says he will seek to secure it , either to assets or income.
QUESTION: if this occurs, and then i do a ch 13, wd the ch 13 wipe out the secured debt after the paymnt plan has been cpmpleted? that is, wd this secured debt ( converted from simple unsecured cc debt) be treated like a mortgage ( which is a secured debt) and 100 pct is still due?
Watch this video about about how unsecured debt becomes secured.
Judgments on unsecured debt will often be treated as unsecured claims in bankruptcy.