Maryland Judgment Debtor Bankruptcy — What Happens to Your Small Claims Judgment

You've been garnishing wages for three months. Payments are arriving. Then a letter shows up: your debtor filed for bankruptcy. Everything stops.

Under 11 U.S.C. § 362, a bankruptcy filing generally creates an automatic stay that halts collection activity nationwide, subject to the statutory exceptions in § 362(b) and any court orders. It doesn't matter that you have a valid Maryland District Court judgment. It doesn't matter that garnishment writs are already active. Once the stay applies, you must stop.

What the Automatic Stay Covers

When the stay applies, it generally prohibits collection actions such as:

• Wage garnishment withholdings must cease
• Bank account freezes must be released
• Sheriff's levies and property seizures stop
• Oral examination hearings are cancelled
• You cannot file new enforcement motions
• You cannot contact the debtor about the debt

This isn't optional and it isn't gradual. If you have an active wage garnishment, notify the employer to stop withholding once you receive notice of the filing. If a sheriff's sale is scheduled, contact the sheriff about the stay. Do not assume that funds frozen in a bank account will automatically be returned; their status may depend on the bankruptcy case and court orders.

What You Must Do Immediately

The moment you learn about a bankruptcy filing — whether from the debtor, their attorney, or an official court notice — take these steps:

1. Stop all collection. Do not file anything, serve anything, or contact the debtor about the debt.
2. Notify garnishees. Send written notice to every employer and bank holding an active garnishment writ that they must cease withholding and freezing under the automatic stay.
3. Contact the sheriff. If a writ of execution is pending, notify the sheriff's office to halt any levy or sale.
4. Check whether to file a proof of claim. If you want to share in a distribution, file your claim (the judgment amount plus accrued interest and court costs) by the deadline in the notice. A proof of claim is not required in every case.

Violating the automatic stay — even accidentally — can result in federal court sanctions, including paying the debtor's attorney's fees and damages.

Chapter 7 vs. Chapter 13 — What Each Means for Your Judgment

Chapter 7 (liquidation): The debtor's non-exempt assets are sold and proceeds distributed to creditors. Most unsecured small claims judgments get little or nothing from the distribution. If the debt is discharged, you are permanently barred from collecting it as a personal liability. The discharge injunction under 11 U.S.C. § 524 replaces the automatic stay; a judgment lien may survive unless avoided.

Chapter 13 (repayment plan): The debtor proposes a 3-to-5-year payment plan. You may receive partial payment through the plan. The automatic stay lasts until the plan completes or the case is dismissed. If the case is dismissed, your Maryland judgment springs back to life and you can resume enforcement.

When Bankruptcy Doesn't Erase Your Judgment

Not every debt is dischargeable. If your judgment arose from fraud, fiduciary fraud or defalcation, embezzlement, larceny, or willful and malicious injury under 11 U.S.C. § 523(a)(2), (4), or (6), you can ask the bankruptcy court to rule the debt non-dischargeable. In cases covered by Federal Rule of Bankruptcy Procedure 4007(c), the complaint is due 60 days after the first date set for the § 341 meeting of creditors; the court may extend that deadline on a motion filed before it expires.

Also, a judgment lien that was already recorded against real property before the bankruptcy filing may survive the discharge unless the bankruptcy court avoids it. The underlying personal liability may be discharged while the lien remains enforceable against the property.

After Bankruptcy Ends

If the debtor's case is dismissed (not discharged), the automatic stay lifts and you can resume enforcement on your original Maryland judgment. Maryland judgments generally last 12 years from entry, but do not assume the bankruptcy period either does or does not toll the applicable deadline; confirm the effect in the specific case before relying on an expiration date.

If the debt was discharged, personal collection is barred. A Notice of Satisfaction under Maryland Rule 3-626 is filed when the judgment has been paid; a discharge alone does not mean the judgment was paid.

Bankruptcy is the one scenario in judgment collection where professional legal help often makes sense. Our Maryland judgment collection guide covers what to do when a debtor files for bankruptcy, but it also notes the boundary where a bankruptcy attorney takes over.

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