The Short Answer
Yes, bankruptcy can help if you have a lawsuit or judgment against you. Filing bankruptcy triggers the automatic stay, which immediately halts any ongoing collection efforts, including lawsuits and judgment enforcement. If a judgment has already been entered, bankruptcy can still discharge the underlying debt — but if that judgment has attached as a lien on your home, a separate motion to avoid the lien will likely need to be filed. The sooner you act, the more options you have to protect your property.
Times are tough right now and sometimes we would like to pay our debts but just simply can’t. While it would be nice to call the creditor and explain your situation, the fact of the matter is, they are still going to expect the money that you owe them. Unfortunately, creditors aren’t always willing to understand your situation. Once you do not pay, they have the right to sue for the money, which is called a “judgment”.
At times there can be some misunderstanding as to what exactly a judgment is. A judgment is what results when you are sued and either don’t respond to the lawsuit or lose the lawsuit. The judge, in finding in favor of the creditor, will award a judgment on their behalf.
Below is a brief timeline on how a lawsuit turns into a judgment:
A lawsuit (complaint) is served from the sheriffs’ department or some other servicing organization. That’s where the common phrase, “you’ve been served” comes from.
From the date that the lawsuit is served, you have 30 days to give a WRITTEN response. You must include a copy to the people who are suing, and have it filed with the courts stating that you are contesting the amount. They will stamp it. Make 3 copies; one for you, one that the court is going to keep, and the other will be sent to the attorneys handling the judgment. Doing this will extend the amount of time
The courts will set a hearing date. You will get a DEFAULT JUDGMENT for not showing up to the hearing. This will basically state that you owe the money. If you do show up to the hearing, unless you can prove that you do not owe the debt the courts will likely rule against you and issue a judgment.
Next will be a RIGHT TO HAVE EXEMPTIONS DESIGNATED. This is just a fancy way to tell you that your creditors are about to try to come take your property. You will have a chance to list all personal property that you wish to protect and you’ll have to use certain types of exemptions to protect your property. If you fill the right to have exemptions designated document out incorrectly you run the risk of losing your property.
After this they will get a WRIT OF EXECUTION which will state that the sheriff will be coming to get the goods that were not exempted.
To protect yourself and your property, you can either pay the amount that is owed (plus the interest that has occurred over time) or file bankruptcy. By filing bankruptcy, you are protected by an “automatic stay” which will stop the creditors from collecting from you or pursuing the judgment further. If the judgment has already been placed against you, you can still file a bankruptcy to get rid of it, but you will need to discuss with your attorney, your further actions. Many times, if you own a home, a judgment automatically puts a lien on your home, and although the bankruptcy will take care of the debt that you owe, separate motions will need to be filed to remove the lien from your property.
The bottom line is you will want to explore the option of bankruptcy before you have a judgment against you if at all possible. If you already have a judgment against you, you will want to contact a bankruptcy attorney immediately to see what options you have to ensure that your property is protected.
Key Takeaways
- A judgment is the court's formal ruling in a creditor's favor after you either don't respond to a lawsuit or lose at a hearing.
- Filing bankruptcy triggers the automatic stay, which stops creditors from pursuing a judgment or collecting on one already entered.
- If a judgment has attached as a lien on your home in North Carolina, the bankruptcy discharge alone does not remove that lien — your attorney must file a separate motion to have it avoided.
- You have 30 days from being served with a lawsuit to file a written response; missing that deadline can result in a default judgment against you.
- North Carolina offers exemptions — including a $35,000 homestead exemption and $3,500 vehicle exemption — that can protect key assets, but you must claim them correctly.
- Acting before a judgment is entered gives you the most flexibility; waiting until after enforcement has begun significantly narrows your options.
Attorney Insight
The mistake I see most often is people waiting until the sheriff is scheduled to show up before they call us — at that point, the writ of execution is already in motion and we're racing the clock. What catches people off guard in North Carolina is that once a judgment is recorded in the county where you own real estate, it automatically becomes a lien on your home, even if the original debt had nothing to do with your house. Discharging the debt in bankruptcy doesn't automatically lift that lien — we have to file a separate lien avoidance motion, and that step gets missed when people come to us too late or try to navigate it alone. If you're holding a summons right now, that's the moment to call, not after the hearing.
