Harleysville, PA asked in Bankruptcy for Pennsylvania

Q: Am I obliged to use proceeds to pay a court judgement over credit card debt, in Pennsylvania?

Good morning,

I, as an individual, received a judgment against me, personally, and I do not have means to pay (but I haven't yet filed for bankruptcy). At the same time, I'm about to receive a small settlement for an action I originated, also as an individual.

Is there a law of Payment Priorities that would preclude me from using the settlement $ to reduce business Credit Card debt (in which I’m a personal guarantor)?

In other words, am I obliged to give the settlement proceeds to the judgement creditor? Will I (or my wife, because she is a partner in the business where I have credit card debt) get in legal trouble if I don’t use the settlement proceeds to pay the judgment?

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1 Lawyer Answer
W. J. Winterstein Jr.
W. J. Winterstein Jr.
  • Bankruptcy Lawyer
  • Boyertown, PA
  • Licensed in Pennsylvania

A: On the facts provided, you have no enforceable legal obligation to pay over "settlement proceeds" to any one or more of your creditors. A judgment creditor could issue/serve a writ of garnishment upon anyone holding money or property for you, and if that is done, the one who holds property payable or deliverable to you would be compelled to report that fact to the creditor and the court, and thereafter, turn over such money or property to the creditor.

You don't disclose the amount or value of the "settlement proceeds". If you receive the funds/property, and then dispose of it without receiving something of equal value in return, any of your creditors could initiate action in court to recover the money/property transferred as a "fraudulent conveyance". There are similar Bankruptcy Code provisions enabling a Trustee or creditor to ask the Court to void a transfer made by a debtor within a few years of the commencement of a bankruptcy of the debtor/transferor.

Lawyers can be expensive, and any creditor, prior to bringing an action to void a transfer of assets, or even to issue execution upon a valid judgment, would surely consider the costs of an effort to capture assets against the value of the item targeted for recovery.

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