Discharging Debts or Damages from Business Litigation

June 13, 2019 By: Carrie Weir

Can You Permanently Rid Yourself of Debts Incurred in Commercial Lawsuits?

In a Chapter 7 bankruptcy petition, available to individuals and businesses, you can permanently wipe out certain obligations in exchange to transferring “non-exempt” assets to the bankruptcy court to partially satisfy creditors. What happens if you are a small business owner hit with a significant judgment or verdict in a business dispute in court? If you must pay the damage award, it may spell the end of your business. Can you discharge a debt incurred as a damage award in litigation?

Can a Judgment Be Discharged?

Under the bankruptcy laws, some types of judgments may not be discharged, including:

• Family law obligations, such as child support and alimony
• Student loan payments
• Judgments owed to government agencies or bodies (tax arrearages, fines and criminal restitution)
• Civil judgments for death or injury in a motor vehicle accident where you were driving while under the influence of drugs or alcohol

There are, as well, a couple types of judgments that are typically non-dischargeable, but require that the creditor file a written objection to the attempt to discharge. They include:

• Judgments for any injury caused by malicious or willful acts
• Judgments for fraud, misrepresentation or breach of fiduciary duty

Accordingly, if your judgment is not of the type listed above, it will generally be dischargeable. It’s important to remember, though, that if there’s a lien on property to back up the judgment, the Chapter 7 only extinguishes the debt, not the lien. Your property can still be seized.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.