What Is a Judgment and What Do I Do About It?

If you are behind on any of your debt payments, you may be worried about judgments. A court judgment tied to debt can result in wage garnishments, bank levies, and seizure of property. A judgment can hurt prospects for housing and employment and may make it harder to survive. Keep reading to learn about the nuts and bolts of judgments, where they come from, what happens when a creditor gets a judgment against you, and what you can do to minimize the consequences associated with debt-related judgments. 

What Is a Judgment?

If a creditor obtains a debt-related judgment against you, that order allows the creditor to recover the debt. Judgments can be civil or criminal, but judgments for past-due debt are civil judgments. Civil judgments can be structured as a monetary judgment or a judgment lien against property. Filing for bankruptcy can help you prevent, pause, or even stop, certain judgments, including wage garnishments and bank account levies.

What Types of Debts Become Judgments?

Consumer and personal debt from medical bills, car loans, credit cards, back rent, student loans, IRS debt, child support, and other overdue financial obligations can result in civil judgments. A debt cannot turn into a valid judgment if the statute of limitations governing that debt has passed, or if the debt has been discharged in bankruptcy. 

How Does a Judgment Happen?

Judgments are usually obtained after a lawsuit has been filed. Before a creditor can obtain a judgment, a summons and complaint must generally be served to the debtor and filed with the court. After that, a court hearing happens, the evidence is evaluated, and a judgment is made. In judgments for debt, the judgment creditor is the entity that is owed money, and the judgment debtor is the individual who owes that money. 

A Summons Is Your Legal Notice That You’re Being Sued

Court cases for civil judgments start with a summons and complaint. A summons is a legal document that gives notice that a case has been filed and provides a deadline by which the subject of the summons must respond to the lawsuit. A complaint explains the legal reasons why the case is being started. Civil procedure laws cover the form, content, and process of a summons and complaint. 

A debt collector named in a summons may have a different name than the original creditor for technical reasons or because the debt was sold. For instance, Discover or Citi credit card debt could be sold to Midland Funding, LLC. Midland Funding, LLC is a debt buyer that uses Midland Credit Management (MCM), a collection agency. Midland Funding, LLC and MCM are subsidiaries of the Encore Capital Group. In this example, Midland Funding LLC would probably be named on the summons. States have different legal requirements for serving a summons, which represents legal notice that you’re being sued.

You Don’t Want a Default Judgment

When the summons and complaint are filed and the process of service is complete, you’ll have officially received notice that you’re being sued. If you don’t respond, you’ll become the subject of a default judgment. A default judgment is made when you don’t appear in court and the creditor that sued you automatically wins their claim. It’s extremely wise to get legal help from an attorney if you receive a summons, as you’ll want to avoid a default judgment being entered against you. 

At a hearing, a judge will review the case and make a decision. If the creditor wins their claim (due to default or based on the merits of their argument), that decision will serve as the judgment and order. The mere fact that a lawsuit has been filed is not enough to garnish wages or seize property, a judgment must be entered before a creditor can take claim to your wages or property. A judgment will be made in writing. When you have a judgment entered against you, the court has ordered you to pay the creditor or turn over assets. Any judgment lien for real property will be filed with the county. 

Defending a Lawsuit in State Court

Lawsuits get thrown out of court for different reasons, which is partially why it’s a good idea to have an attorney defend your case. Summonses and complaints are often improperly served, and debt collection is often time-barred. An attorney will recognize errors and help you present the strongest case possible. 

Here are some defenses attorneys use to help get a debt-related lawsuit dismissed:

• The statute of limitations for the debt has passed 

• Identity theft

• Fraud

• Somebody else owns the account

• You paid the debt

• The account information is wrong (it has to be more than a typo)

• Violations to the Fair Debt Collection Practices Act (FDCPA)

• You don’t owe the debt 

• Improper service

• Your debt was discharged in bankruptcy 

If none of these defenses applies to your situation, then it’s likely you’ll be stuck with a judgment. 

What Happens if a Debt Collector Gets a Judgment?

When a debt collector obtains a judgment, your money and/or property may be legally seized. A judgment doesn’t end collection agency activity, it gives judgment creditors new methods to collect debt. They can potentially garnish wages, levy bank accounts, and seize personal property. 

Judgment Liens

A judgment lien is an order by the court that allows a creditor to take a debtor’s property to recover payment for a debt. Judgment liens are public record and are filed with the county or state. If you don’t have any property, the lien may potentially be applied to property you’ll own in the future. 

State laws govern what property a lien can touch. In some states, a judgment lien can get attached to your real property, car, or personal property. In others, it can only be attached to your real property. When a lien is in place, you won’t be able to sell or transfer the affected property until you’ve cleared the lien.

After a judgment is entered, a writ of execution can take place. This is when things can go from bad to worse. Writ simply means a writing, and execution simply means to take action. A writ of execution dealing with a judgment is a written document from the court that tells a sheriff or a person in a similar position of authority that your property can be seized to pay off the debt. If the property is sold, money from the sale is used to pay off the debt. If the debt isn’t paid in full, a “deficiency” will remain, and that amount will still be owed. This action is uncommon but remains a possibility.

How Do I Find Out if I Have a Lien?

Since a lien is a public record, you can check the website for your county clerk recorder, register of deeds, or county tax assessor’s office and search for the property address to determine whether your property has been affected by a lien. You can also go to the county clerk’s office in person to request information and check records. The easiest place to start is to call your county clerk’s office. 

Action on some civil judgments and writs of execution may be paused because of Covid-19 and court closures. You can also call the court clerk and find out how to check court records for judgments and writs of execution in your area.

To find out if a car lien exists, you can check the car title or get the VIN and ask the motor vehicle department to run a title check for liens. You can also check for a lien search tool on state websites for the Secretary of State or motor vehicle department. 

In 2017, the major credit score reporting agencies—Equifax, Experian, and TransUnion—stopped reporting civil judgments under the National Consumer Assistance Plan (NCAP), but other private reporting companies continue to report judgments. T

he FDCPA still allows credit reporting of civil judgments for seven years. If you have been affected by lien activity in the past, you can request a free copy of your credit report for review to confirm a lien was removed from your credit history, and see if your credit score improved.

If you pay your debt, a satisfaction of judgment should be recorded with the courts. You can call the court clerk, and in some cases, check a court’s website, to confirm that it has been properly filed. 

Am I Judgment Proof? 

If you have no significant income or assets, or your real property and wages are protected under state and federal laws, then you’re likely to be considered “judgment proof.” Being judgment proof means that even if a creditor obtains a judgment order against you, they won’t be able to enforce it because you have no assets that can legally be pursued by your creditors. 

It’s important to keep in mind that judgments can be renewed and you may not always be judgment proof. There are some types of income that can’t be touched for judgments, such as pensions, SNAP, SSI, SSDI, TANF, and child support. Additionally, if your judgment debt was discharged in bankruptcy, you no longer owe the debt. 

What Do You Do With a Judgment?

You can pay a judgment or see if you can set up a monthly payment plan with the debt collector. Once the debt is paid, a satisfaction of judgment will be issued and put on public record to show you paid the debt.

If you can’t pay the debt, you might be able to get the debt discharged through bankruptcy. When you file your bankruptcy petition, you’ll benefit from the automatic stay that generally stops civil judgments, wage garnishments, bank account holds, foreclosures, collection calls, and collection letters.

Bankruptcy is also a preventative measure because debt collectors can’t advance to the judgment stage and put a lien on real property or personal property while a bankruptcy case remains active.

The Bankruptcy Discharge and Judgments

Bankruptcy can potentially result in the discharge of civil judgments from unsecured debt. This includes judgments for credit card debt, medical bills, and back rent. If a debt is discharged, your balance will be $0.00 and the creditor will no longer be allowed to pursue the debt. It gets trickier with secured debt and judgment liens. You may be able to get a judgment lien discharged in bankruptcy, but the exemptions you claim will matter. 

You’re allowed a certain value for exempt property, such as a house and car, but the amount exempted is determined by state and federal law and can differ between states. Bankruptcy can’t help with all judgments. Judgment from debts such as recent IRS debt, child support, alimony, court fines, or DUI related court-ordered liabilities, and most government-backed student loan debt won’t be discharged in bankruptcy. 

Let's Summarize...

It can be scary to receive a summons for a civil lawsuit or a notice of judgment for debt, but it’s important to avoid ignoring your debt. Even if you get a court judgment, you may be able to make a monthly payment plan, or you might be able to file Chapter 7 bankruptcy and wipe out eligible debt forever. If you receive a summons or judgment notice, find an attorney that can give you legal advice and consider filing bankruptcy.

Upsolve's web app can help you if you’re willing to file bankruptcy on your own. A judgment isn’t the end of the world. Bankruptcy can get you through the hard times, so you can say goodbye to judgments and hello to a fresh start.