Does it matter if I let my creditor get a default judgment before I file bankruptcy?

You’ll hate this answer:  it depends.

If you let a creditor get a default judgment against you, it is not the end of the world.  Bankruptcy will generally wipe out your liability on that default judgment.  You can usually file your bankruptcy quickly enough to stop any kind of collection even if the creditor gets a judgment.  

However, here are some bad things that can happen if you wait to file bankruptcy until after the default judgment (some of these happen immediately, some take time):

  1.  garnishment (takes about 2 weeks after the judgment) … If the creditor knows where you’re working, he will file garnishment paperwork and start hitting your paychecks for about 25% a paycheck.
  2. negative credit (immediate) … Even when the bankruptcy discharges your liability for the judgment, that judgment still sits on your credit report as a public record for the next 7 years.
  3. attachment (immediate to a few days depending on where you live)…If you own a home, the creditor can run down to the county recorder and record that judgment against your home.  Now when you file bankruptcy, you’ll have to pay extra legal fees to strip or avoid that judgment lien (if you can).
  4. writ of execution (takes around 2 weeks) … The creditor may come to your home with a sheriff and a writ of execution, which allows him to take your property (like laptops, kid’s gaming systems, and your television) and sell it at auction to pay off the debt.
  5. bank levy (can happen in less than a week)… The creditor levies (takes) the balance in your bank account on the day the levy hits.

And yes, bankruptcy can stop these.  However, it sure is nice to file bk before the storm hits.