Many individuals come into my office concerned about the fact that they
have received a notice from their Sheriff's office or a law firm that
a judgment has been entered against them. Often times, this is the first
time they have really been made aware of a lawsuit that has been filed
against them. Unfortunately, by the time a judgment is issued, the lawsuit
has reached its conclusion and the issuance of a judgment means that the
creditor has won their case against you, for now.
The most immediate effect of a judgment is that it serves as a basis for
a creditor to recover money from you and in the very near future. The
most common way a judgment is enforced is through an income execution
order sent to your employer. This is known as "wage garnishment".
In New York State, 10% of your gross salary can be garnished by your average
judgment creditor. The second most common way a judgment is enforced is
through restraining your bank account for the amount of the judgment (and
often for a higher amount, if permitted by NY law). There are rules for
how much money can be taken from your account, what funds cannot be taken
and how much you may be able to withdraw from your account once the restraint
occurs, however, this doesn't change the fact that a restraint can
cause you a lot of stress and financial hardship when it occurs.
A secondary effect, which is not often immediately felt by an individual,
is how a judgment can affect your real property. The simple explanation
is that if a judgment is recorded in the county where you own real property,
such as your home, it attaches as a "judgment lien" to your
real property. What this means is that you could be prevented from selling
your home or re-financing your mortgage, unless you are able to satisfy
this additional lien now recorded against the property. Think of it as
a second or third mini mortgage against your home...although you are not
making monthly payments, when it's time to sell, there has to be enough
money available to pay it off. Often times, this satisfaction will be
achieved by paying a creditor less than what you owe them in exchange
for them issuing you a satisfaction of this debt. However, this can result
in 1099 income to you- known as 1099-c income or "cancellation of
debt income", which may be taxable to you.
Believe it or not, bankruptcy may be able to help you in this situation.
First of all, if filing for bankruptcy is an appropriate option for you,
filing your case will put an end to any wage garnishment or bank account
restraints. And, if you obtain a discharge, that debt can never be collected
upon again against you personally or any other property you may acquire.
Furthermore, debt discharged through bankruptcy does not result in 1099
income. That's the immediate effect of a bankruptcy discharge, your
personal liability for the debt and collection efforts go away.
However, if you own real property, the lien against your property that
was already in place when you filed does not go away unless you take additional
actions, if they are available to you in your case, to remove or strip
a "judgment lien". This is because absent a court order to the
contrary, a lien will survive a bankruptcy discharge. A creditor may not
be able to collect against you personally, but if you do not remove the
lien, they can collect against the property you owned at the time of your
filing. But there is hope because due to the relief available to you under
the bankruptcy code, you may be able to strip a judgment lien from your
property. In order to know whether this remedy is available to you, you
should speak with a qualified bankruptcy attorney who can evaluate your
Questions or interested in a consultation about your case? Email Natasha
Meruelo, Esq. at email@example.com or call me at (914) 517-7565. The
first consultation is always free of charge.
Natasha Meruelo, Esq. is located at 445 Hamilton Avenue, Suite 1102, White
Plains, NY 10601.