Collecting on a court judgment is rarely simple—but things get even more complicated when the debtor files for bankruptcy. If you’re trying to collect what you’re owed and suddenly learn the person or business has gone bankrupt, it’s natural to feel frustrated. But don’t give up yet. There are still ways to protect your rights and potentially recover your money.
This guide breaks down how judgment collection and bankruptcy work together—and what steps creditors can take when faced with this situation.
What Happens When a Debtor Files for Bankruptcy?
When someone files for bankruptcy, the court gives them protection from most collection efforts. This protection is called an automatic stay. It goes into effect the moment the bankruptcy is filed. That means you must immediately stop:
- Calling or emailing the debtor for payment
- Sending demand letters
- Trying to garnish wages or seize assets
- Filing or continuing lawsuits
If you break the stay—even by mistake—you could face penalties. So it’s important to act carefully once you receive notice of a bankruptcy.
Understanding the Automatic Stay
The automatic stay is designed to give the debtor some breathing room. It stops all collection activity so the bankruptcy court can look at the person’s finances and decide how to handle their debts. While this can be frustrating for creditors, it’s also an important part of the process.
In some cases, creditors can ask the court to lift the stay, especially if the debt involves property that’s losing value or wasn’t part of the bankruptcy. But this requires a motion and usually a hearing, so it’s best handled by a skilled Judgement Collection Attorney.
What Happens to the Judgment?
When someone files for bankruptcy, their debts are grouped together and reviewed by the court. Judgments are considered unsecured debts unless they are backed by property or liens. Here’s how it breaks down:
- Secured Judgment: If your judgment is tied to a specific asset (like a lien on a house), you may have a better chance of getting paid.
- Unsecured Judgment: If your judgment is not backed by property, you may have to share any money the debtor has with other creditors—and you might only get a portion of what you’re owed.
Sometimes, the debtor may list your judgment in their bankruptcy paperwork and ask the court to “discharge” it, meaning they no longer have to pay it. But not all judgments can be discharged.
Exceptions: When a Judgment Can Survive Bankruptcy
Some types of judgments are considered non-dischargeable. That means the debtor will still owe you the money even after bankruptcy is over. These include:
- Judgments for fraud
- Willful or malicious injury to a person or property
- Certain types of fines or penalties
- Debts from drunk driving accidents
- Some taxes or government debts
If your judgment fits into one of these categories, you may be able to continue collecting—even after the bankruptcy is complete. However, you must usually file a special action in bankruptcy court, called an adversary proceeding, to prove it should not be discharged.
Filing a Proof of Claim
If you receive notice that the debtor has filed bankruptcy, you’ll also be told how to file a proof of claim. This is your chance to tell the bankruptcy court how much you’re owed and why.
It’s important to file this on time. If you miss the deadline, you may not receive anything at all—even if the debtor’s assets are later distributed.
Your claim should include the court judgment and any interest or costs owed. A Judgement Collection Attorney can help ensure your claim is properly filed and that your rights are protected during the bankruptcy.
What If the Debtor Hides Assets?
Unfortunately, some people try to hide money or property before filing bankruptcy. If you suspect the debtor is doing this, let your attorney know right away.
The bankruptcy court can investigate suspicious transfers of property or money—especially if they happened shortly before the filing. This is known as a fraudulent transfer or preferential payment, and the court may undo those actions to make things fair for all creditors.
The Bottom Line
Judgment collection becomes more complex when bankruptcy is involved—but it’s not always the end of the road. The key is understanding your rights and acting quickly.
You may not be able to collect everything you’re owed, but you can often recover some portion of the judgment—especially if you have legal help guiding you through the process. In some cases, your judgment may even survive the bankruptcy and allow continued collection efforts after the case ends.
Need help collecting a judgment when the debtor has filed for bankruptcy?
Turn to Warner & Scheuerman. Our experienced Judgement Collection Attorney team knows how to navigate the intersection of collection law and bankruptcy—and we fight hard to help our clients recover what they’re owed.