Can Filing Bankruptcy in Arizona Erase Judgements?
- Strictly speaking, bankruptcy cannot automatically erase a judgment against you in Arizona. However, what a bankruptcy can do is force your creditors to immediately cease their collection activities. Once you get a bankruptcy discharge, the debt underlying the judgment is rendered noncollectable, meaning your creditors can no longer garnish your wages or attach liens or levies to your property. While the judgment still technically exists until you have the issuing court remove it, the court renders it unenforceable when it issues a bankruptcy discharge.
- The process of actually erasing an Arizona judgment against you is mainly administrative in nature. After getting your bankruptcy discharge, you or your attorney must contact the Arizona court that issued the judgment against you. Upon receiving a copy of your discharge papers, the court will vacate the judgment on your behalf.
- If your judgment has evolved into a lien against your property, it may be harder to avoid with an Arizona bankruptcy. A lien survives most bankruptcy proceedings, so even though you may not be liable for the underlying debt, the lien against your property will remain. If you sell that property, the lien will be paid off before you receive any money. The exception is if the lien is attached to property that you can protect using Arizona bankruptcy exemptions. For example, Arizona offers debtors an generous exemption of $150,000 of homestead value, so if your judgment lien attaches to your home, it vanishes in bankruptcy if you have less than $150,000 equity in your home.
- While a bankruptcy discharge may help you clean up your credit by eliminating your debts, it cannot hide your financial past. Any negative items listed in your credit report will still remain even after a bankruptcy discharge, typically for seven years. This applies not only to the past-due accounts you discharged in bankruptcy, but also to the public record of the judgment lodged against you.