A judgment is a legal ruling that settles a dispute and outlines the terms of a debt, including the creditor’s right to collect through wage garnishment or property seizure.
A judgment is an order issued by a judge or jury to settle a lawsuit. This decision details the rights, responsibilities, and obligations of each party. For example, if you fail to pay a debt, the lender can take you to court. In this case, the judge may order you to pay the other party as part of the court’s final judgment.
The order can be issued in one of two forms:
There are several classifications for judgments, including:
Ultimately, if you don’t pay a debt, the lender or bill collector can file a lawsuit against you to recoup the money. The judge or jury determines if and how much money you owe. These terms are laid out in the final judgment.
Your property includes both physical items and money. That means judgment creditors can seek debt payment from more than your wages and bank accounts. They may also take back a car you financed or other personal property. Another option is placing a lien on some of your property, such as your home.
Creditors must follow the law when applying a judgment to take, or seize, your property. Some things are exempt—which means they can’t touch those items or properties. Some examples include the home you live in, the furnishings inside it, and your clothes. State laws identify these items and set limits based on their value.
Non-exempt property can be taken to help meet a judgment debt. Your creditor can take or leverage these possessions in the following ways:
Judgments come in many forms. Below is a look at the five types of judgments.
There are several ways a civil judgment can be determined.
As the name suggests, a judgment after trial is a decision that occurs only after a trial. Once the judge or jury hears all the evidence and makes a final decision, the judge issues a formal judgment in the case.
A consent judgment occurs when both parties negotiate a final settlement. The judge must approve this final agreement, which is done by issuing a formal consent judgment.
A default judgment occurs when the defendant fails to respond to a summons and complaint. In this case, the judge issues a default judgment in favor of the plaintiff without hearing any evidence from the defendant.
Judgments can’t directly impact your credit because the details of these orders aren’t part of your credit report. However, it’s likely that issues leading up to the final judgment could affect your credit. For example, your payment history can remain on your credit report for up to seven years. If you have any missing or late payments that led to the judgment, this history can impact your credit score.
A judgment could also have a positive effect on your credit. For example, once you’ve paid off the debt, the account balance should change to zero on your credit report. This could help lower the amount of debt you owe, which could impact your credit utilization rate.
Judgments aren’t reported on your credit report and don’t directly impact your credit score. For many years, credit reports included judgment information. But that changed in 2017. The National Consumer Assistance Plan is responsible for creating more accurate credit data requirements. These changes resulted in the removal of civil debt judgments from credit reports.
However, judgments are public records, so lenders could still have access to this information through public records databases. This could affect your ability to secure credit in the future.
The court enters a judgment against you if your creditor wins their claim or you fail to show up to court. You should receive a notice of the judgment entry in the mail. The judgment creditor can then use that court judgment to try to collect money from you. Common methods include wage garnishment, property attachments, and property liens.
State laws determine how much money and what types of property a judgment creditor can collect from you. These laws vary. So, you need to look to your own state for the rules that apply. A consumer law attorney can help you understand your state’s laws on judgment collections.
You’re legally obligated to make these payments. If you can’t pay the amount all at once, you may be able to set up a payment arrangement. And if you own a limited amount of property, it may all be exempt from judgment collection efforts. Also, you may not work or only work part-time. With the CCPA cap, that may mean you don’t earn enough for garnishment.
This inability to pay your debt is called being judgment-proof, collection-proof, or execution-proof. While these circumstances exist, the judgment creditor has no legal way to collect the debt. It’s not a permanent solution. The creditor may revisit collection efforts periodically for many years.
For a more permanent solution, you may want to consider filing for bankruptcy. This process can discharge or eliminate most civil judgments for unpaid debt. Exceptions apply for things like child support, spousal support, student loans, and some property liens. Speak with a bankruptcy lawyer to learn whether this will help your situation.
A civil court typically involves disputes between two parties. For instance, it could involve a case between two individuals, two organizations, or one organization and one individual. These cases often pertain to a breach of contract, an unsettled debt, or a lack of services.
Unless both parties agree to the facts of the case, the judge gives each party the opportunity to present evidence. For example, if a debt collector takes you to civil court for an unpaid bill, you can provide evidence of any payments you made. After hearing the evidence, the judge issues a final judgment, known as a civil judgment.
On the other hand, criminal court involves someone accused of breaking the law. The federal, state, or local government charges the accused party. If, after holding a trial, the defendant is found guilty or the defendant pleads guilty prior to the trial, the judge issues a criminal judgment. A sentence is issued later, which could include jail time or some other form of punishment.
Heading off a lawsuit is the best way to avoid a judgment. To do so, don’t ignore calls and correspondence from your creditor. Reach out to learn if they’ll accept suitable payment arrangements. Educate yourself on smart ways to pay debt collectors, and consider using the services of a debt management agency.
What if the loan company or debt collector has already started the lawsuit? Don’t skip court. Show up and fight. You may win if the statute of limitations has expired.
If you haven’t made a payment on an old debt for many years, you may have a successful legal defense. Most states set the time frame between four to six years. Collectors often still file suit because they win by default if you don’t show up. So, it’s important that you go to court with proof of your last date of payment.
If you successfully defeat or avoid a judgment, don’t stop there. Take some sensible steps to help you get out of debt and stay out. Adopting these smart financial habits can also help prevent future judgment actions.
The answer depends on where you live, since state laws differ. Some states limit collection efforts to five to seven years. Others allow creditors to pursue repayment for more than 20 years. With the right to renew a judgment over and over in many states, it may last indefinitely.
Judgment renewals may be repeated as often as desired or limited to two or three times. This is another state-specific issue. Judgments can also lapse or become dormant. The creditor must then act within a specific time frame to revive it.
If you can afford to pay a decent lump sum, you may be able to negotiate a settlement. The judgment creditor may be willing to settle if they fear you will otherwise file bankruptcy. Get the terms and settlement amount you agree upon in writing. Be sure the creditor agrees to file a satisfaction of judgment with the court after they receive your payoff.
Challenging and overturning a judgment is difficult but not always impossible. This is the case if there were errors. Perhaps you weren’t notified of the suit, or it was never your debt to begin with. Consult with an attorney to find out whether you have grounds to challenge the decision.
If you want to challenge a judgment, act fast. If you received prior notice of the case, you may have up to six months to reopen it. If you weren’t notified, you likely have up to two years to appeal. By reopening the case, you have the opportunity to fight the claim anew.
You should receive a summons when you’re being sued. So, you can expect a default judgment will follow if you don’t show up in court. You can also expect a notification when a judgment is entered against you.
Mistakes happen, though. You may have missed the notice or moved to a new address. If that happens, you may not learn of the judgment until collection actions start.