• When someone does not pay a bill as promised, the creditor has the legal right to pursue a civil judgment against that person. If the consumer loses the lawsuit, a judgment is entered, which can lead to wage garnishments. At this point, some people may choose to file bankruptcy, according to the book "How to File for Chapter 7 Bankruptcy." Before filing bankruptcy because of a judgment, consider the potential financial and personal implications of both situations.
  
  

Basic Facts about Bankruptcy and Awarded Judgments

• If you were successfully sued, a judgment notation will be reflected on your credit reports for up to 10 years from the date of filing, according to Experian.
  
  If your judgment is unpaid and you file bankruptcy, the creditor and court usually cannot legally attempt to collect on the lawsuit while your local division of the United States Bankruptcy Court decides upon your case. If you file Chapter 7 bankruptcy and the judge agrees with your inability to pay your debts, any judgment due to credit card or similar debts is legally forgiven, according to "How to File for Chapter 7 Bankruptcy." If you pursue partial debt repayment through Chapter 13 bankruptcy, the judge will decide if that debt takes "priority" over other obligations such as owed medical or utility bills.
  
  

Basic Facts about Bankruptcy and Possible Judgments

• Some people file for bankruptcy due to a fear of possibly being sued for debt, according to "How to File for Chapter 7 Bankruptcy." Credit card companies, banks and debt collection agencies may sue you if they feel there is no other recourse for getting the owed money.
  
  If you file for any type of bankruptcy, all collection activity must immediately stop. This applies whether you were recently served with a pending lawsuit or creditors are threatening lawsuits. Remember that being served with a lawsuit does not mean you received a judgment; a local civil court judge must decide if that judgment has merit.
  While your bankruptcy case is being decided before the appropriate local division of the federal court, any pending civil lawsuits must be halted until the bankruptcy judge decides what to do. Likewise, no consumer creditor can legally sue you while the bankruptcy case is under judicial review. It also cannot sue you or pursue any other debt collection activity once your case is accepted or "discharged" by the bankruptcy court.
  
  If you are sued for a consumer debt during a pending case or after a discharged bankruptcy case, immediately contact your local bankruptcy court.
  
  

Judgments That Cannot Be Included in Bankruptcy

• If you received a civil judgment due to your criminal activity (such as drunken driving or fraud), unpaid child support or alimony, you will not receive bankruptcy protection for such debts, according to "How to File for Chapter 7 Bankruptcy." Debts related to spousal or child support, court fines and civil liability due to criminal activity cannot be discharged in bankruptcy. However, no matter what bankruptcy you choose to pursue, you cannot under federal law receive financial forgiveness for such debts.
  
  (Reference 1)