Does a Court Judgment Survive Bankruptcy Discharge?

Navigating the turbulent waters of bankruptcy can be a daunting task. One of the common questions that arise in this regard is Does a Court judgment survive bankruptcy discharge? This article seeks to provide a comprehensive answer to this query.

Defining the Terms

Before diving into the heart of the matter, it’s crucial to define some key terms.

Bankruptcy

Bankruptcy is a legal procedure that enables individuals or businesses unable to pay their debts to seek relief from some or all of their debts. In Canada, this procedure is governed by the Bankruptcy and Insolvency Act.

Discharge

Bankruptcy discharge refers to the point in the bankruptcy procedure when the debtor is legally released from the obligation to repay the debts included in the bankruptcy.

Court Judgment

A court judgment is a decision made by a court following a lawsuit. In the context of debts, a court judgment often involves a court ordering a debtor to repay a certain amount to a creditor.

The Intersection of Bankruptcy and Court Judgments

Often, individuals or businesses declare bankruptcy after a court judgment has been passed against them. This could be due to a civil or commercial case where they were unable to fulfill their financial obligations.

The Effect of Bankruptcy on Court Judgments

Under normal circumstances, bankruptcy discharge eliminates the debtor’s legal obligation to pay most debts, including those under court judgments. It means that after the discharge, the debtor is no longer legally required to pay any debts that were discharged.

But Does a Court Judgment Survive Bankruptcy Discharge?

The simple answer to this is: it depends. As a general rule, a court judgment for a dischargeable debt, such as credit card debt or personal loans, can be eliminated through bankruptcy. However, there are exceptions to this rule.

Exceptions to the Rule

Certain types of debts are non-dischargeable under bankruptcy law. This means that even after bankruptcy discharge, the debtor is still obligated to pay these debts. These include:

  1. Certain tax debts
  2. Student loans (if it’s less than seven years since the debtor ceased to be a student)
  3. Child and spousal support arrears
  4. Debts arising from fraud or theft
  5. Court fines or penalties
  6. Debts from personal injury caused by driving while intoxicated

If the court judgment is related to any of these categories of debts, then it will survive bankruptcy discharge.

The Role of a Trustee

In a bankruptcy case, a trustee plays a vital role. They are responsible for administering the bankruptcy, which includes selling the debtor’s assets to repay the creditors.

What If the Creditor Wasn’t Notified?

In a bankruptcy case, all creditors should be notified of the bankruptcy. If a creditor wasn’t notified and thus didn’t have a chance to file a claim, it could potentially complicate matters.

Conclusion

So, does a court judgment survive bankruptcy discharge? The answer depends on the specifics of the case. While most court judgments can be discharged in bankruptcy, there are certain exceptions. Therefore, it’s crucial to consult with a legal professional to understand what applies to a specific situation.

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