Debt Judgment May Trigger Bankruptcy

Among the choices for dealing with a debt judgment, declaring bankruptcy is the nuclear option.

Bankruptcy is a powerful weapon for wiping out debt, but comes with serious consequences for the debtor who pushes the button. For help finding a bankruptcy lawyer check the National Association of Consumer Bankruptcy Attorneys website.

On the plus side, filing for bankruptcy halts collection action. AChapter 7 proceeding generally wipes out unsecured debts, including debt judgments, while selling off your property that is not protected under state and federal exemptions. Under a Chapter 13proceeding, debtors enter a repayment plan to wipe out a portion of their debts over three to five years.

"Having assets and income to protect are an important hallmark of a need to file bankruptcy," said Robert Lawless, law professor at the University of Illinois and member of the National Bankruptcy Conference. The average Chapter 7 consumer bankruptcy case filed in 2012 had nearly $116,000 in total assets and median monthly income of $2,764, according to the Office of U.S. Courts. For the ins and outs of consumer bankruptcies, check the U.S. Bankruptcy Court's "Bankruptcy Basics."

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