What Happens After the Judgment Is Entered?
A judgment can turn an otherwise uncollectible old credit account into a collectible amount of money. For instance, a statute of limitations may prevent a creditor from collecting funds you owe them, after a set number of years. But that same creditor may initiate a lawsuit against you—hoping that you’ll ignore it—thus allowing them to receive a default judgment against you. Had you shown up in court, the statute of limitations would have guaranteed your win. This is known as an “affirmative defense.” If you beat a case because the statute of limitations has expired, failure to pay the debt will still affect your credit record. Different types of debt have different time limits. These vary, depending on whether it’s an oral agreement, written contract, promissory note, or open-ended account.
A Judgment Can Be Good for 20 Years or More
Depending on your state, a judgment remains valid from five to 20 years or more. That’s a long time for a debt to follow you around. Furthermore, judgments show up on credit reports for up to seven years and may appear on background checks until the judgments expire, whichever is longer.
How a Creditor Can Use the Judgment
Under state law, a judgment is a lien on the property, which opens up a host of possibilities for creditors. You will be left with some money to live on. That amount depends on the state where you live. However, pension benefits, Social Security, disability payments, and unemployment and worker’s comp benefits cannot be levied or garnished for private debt such as credit card bills, car loans, or medical expenses. They can be garnished for child support and alimony obligations, as well as student loans. Your creditor can present the judgment against you to a sheriff, instructing them to seize and sell your property, to pay off judgments. This action, called a “writ of execution,” can be extremely unnerving. Imagine a deputy knocking on your door with that piece of paper, entitling them to take your plasma TV or drive off in your car. In some states, creditors can force the sale of your home. At the very least, the judgment appears in your county’s property records, so when you sell or refinance your property, the title insurer will require that the judgment be paid in full from the proceeds.
How Can You Avoid a Judgment?
Get referrals from your state’s bar association, your professional network, and other attorneys you know and trust. Bring copies of your debt records and any relevant communication to leave with the attorney. Judgments can disrupt your finances and your job, and they can prevent you from obtaining insurance, renting an apartment, or gaining security clearances. Therefore it can be well worth the effort it takes to attempt to negotiate a settlement before things get into court and to defend any lawsuit filed against you.
