Introduction
Before the person or company that owes you money can win a judgment against you, they must first file a lawsuit in court. If you ignore the lawsuit, the court will automatically enter a judgment against you, known as a default judgment. Of course, even if you file an answer to the lawsuit, you can still lose the case.
What happens after a judgment is issued?
A judgment can turn an old, uncollectible account into a payable amount. For example, the law may limit the time frame for creditors to collect the money owed after a set number of years. However, the same creditor can initiate a lawsuit against you – hoping that you will ignore it – allowing them to obtain a default judgment against you. If you attend court, the time limit set by law will ensure your victory. This is known as a “positive defense.”
If you win the case due to the expiration of the specified time period, failing to pay the debt will affect your credit record. The time period varies for different types of debts, depending on whether it is a verbal agreement, written contract, promissory note, or open account.
A judgment can be valid for 20 years or more
The validity of a judgment depends on the state you live in, where it may remain valid for anywhere from five to twenty years or more. That is a long time to pursue a debt. Furthermore, judgments appear on credit reports for up to seven years and may show up in background checks until the judgment expires, whichever is longer.
How can a creditor use the judgment?
Under state law, a judgment acts as a lien on property, opening up wide avenues for creditors. If your state allows it, the judgment can file a collection request with the court and your employer, directing the employer to withhold part of your wages for the creditor. Garnishments may also target bank accounts.
You will still have some money left for living. This amount depends on the state you live in.
However, retirement, Social Security, disability payments, unemployment, social security benefits, and disability payments cannot be garnished for private debts such as credit card bills or car loans or medical expenses. They can be garnished for child support and family obligations, as well as student loans.
Your creditor can present the judgment against you to the sheriff, directing them to seize and sell your property to satisfy the judgment. This procedure, known as “writ of execution,” can be extremely confusing. Imagine a deputy knocking on your door with that paper, authorizing them to take your plasma TV or drive your car away.
In some states, creditors can force the sale of your home. At the very least, the judgment appears on property records in your county, so when you sell or refinance your property, the title insurance company will require the judgment to be satisfied in full from the proceeds.
How can you avoid a judgment?
Look for an attorney experienced in defending debt collection cases and knowledgeable about the Fair Debt Collection Practices Act (FDCPA). If your debts are exceedingly high, it may be beneficial to consult with a bankruptcy attorney.
Get referrals from your state’s bar association, your professional network, and other lawyers you know and trust. Bring copies of your debt records and any relevant communications to leave with the attorney.
Judgments can disrupt your financial life and your job, and they can prevent you from getting insurance, renting an apartment, or obtaining security clearances. Therefore, it can be worthwhile to make the effort to negotiate a settlement before things reach court and to defend against any lawsuits brought against you.
Questions
Repeated
What are my options if a judgment is entered against me?
You can pay the judgment in full, try to convince the creditor to agree to accept installments, file for bankruptcy, or use wage garnishment to pay your debts. Before you do anything, you should talk to a lawyer to determine your options.
Can I be sent to jail if I can’t pay the judgment?
No, because a judgment is a civil matter. People are sent to jail for criminal offenses, not for civil matters like an unpaid debt.
How do I know if there is a judgment against me?
You may receive a letter or call from the creditor, a notice from your payroll department that your wages are being garnished, or a notice from the bank that your account has been frozen.
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Check out our editorial process to learn more about how we verify facts and maintain the accuracy, reliability, and quality of our content.
Consumer Financial Protection Bureau. “What is a judgment?”
Consumer Financial Protection Bureau. “What is the statute of limitations on debt?”
Texas Legal Aid. “What is an affirmative defense?”
Federal Trade Commission. “Time-barred debts.”
Florida Attorney. “The life of a money judgment in Florida is limited for certain purposes only.”
Virginia Law. “§ 8.01-251 Limitations on enforcement of judgments.”
Consumer Financial Protection Bureau. “How long does negative information stay on my credit report?”
Consumer Financial Protection Bureau. “What is garnishment?”
Consumer Financial Protection Bureau. “Can a debt collector seize Social Security or veteran benefits?”
Napa County. “Property tax lien – Writ of execution.”
U.S. Marshals Service. “Service of process: Writ of execution.”
National Association of Realtors. “What is a lien on property? An unpaid debt can hinder the sale of your home.”
American Bankruptcy Institute. “What it means to have a judgment against you – and what you can do about it.”
American Bankruptcy Institute. “What it means to have a judgment against you – and what you can do about it.”
Source: https://www.thebalancemoney.com/what-happens-when-a-court-issues-a-judgment-against-you-316309
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