Can bankruptcy void and remove judgments?
In many cases, yes.
A bankruptcy judge can issue a specific order voiding a lien or other outcome of the judgment. Even without such specific order, if the debt that resulted in the judgment is discharged through bankruptcy, a creditor does not have a right to enforce the judgment.
Generally, if a creditor put a lien on a person’s real estate using the judgment, then we would need to obtain a very specific order of the bankruptcy court to overturn or reduce the lien. Otherwise, a general order discharging the debt at the completion of the case should be sufficient to avoid the judgment.
Before the case is completed and the debt is discharged, creditors have to put their collection activities on hold as soon as the case is filed and either wait for the outcome of the bankruptcy case, or go to bankruptcy court if they believe they are entitled to another resolution.
Most common example is wage garnishment. Let’s say that Citibank had filed a lawsuit against Mike because of his delinquent credit card account, obtained a judgment against him, and started garnishing his wages on October 1st. One month later, on November 1st, Mike files a bankruptcy petition. As soon as the case is filed, Citibank has to stop the wage garnishment, and it does not have a right to resume the garnishment later assuming the case is completed successfully and the credit card debt in question is discharged. Citibank also would not have a right to send collection letters to Mike, call him or use other tactics to collect once the petition has been filed. Not only this, but Mike may be entitled to get back the wages that were garnished from him before the filing of the bankruptcy case.
While this is good news, being able to void the effects of the judgment without losing money or property is very time-sensitive. The longer you wait after the judgment, the higher the chances that a judgment lien may not be voidable, or that the funds garnished or levied from you would not be refunded, at least fully. If a creditor filed a lawsuit against you and especially if there has already been a judgment, act quickly and consult an attorney to protect your wages and property.