Judgments: How Long Do They Last and Will Bankruptcy Help?

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In a Nutshell

How long a judgment lasts depends on state law. While most judgments only last for 5-10 years, some may be renewed for longer than 20.

Written by Attorney Jenni Klock Morel.  
Updated September 2, 2020


When an individual falls behind on their credit card bills or other loan obligations, they can be sued by a creditor for the unpaid debt. If the creditor is successful in their lawsuit, they will obtain a court judgment. A judgment creditor can take more extreme debt collection action than a debt collector can prior to obtaining a judgment. Judgment debtors - people who owe money on a judgment - should know that judgments will be listed on credit reports and usually last from 5-10 years. However, some states allow specific kinds of judgments to renew up to 20 years or longer. Read on to learn more about how judgments are obtained, the post-judgment process, and how long judgments last. 

How Does a Creditor Get a Judgment?

Unpaid debt can result in a collection lawsuit being filed against you. After you fall behind on your monthly payment obligation, your creditor will begin collection efforts. Debt collection typically begins with phone calls and demand letters. Eventually, the creditor may transfer or sell the debt to a debt collector. If your original creditor sells the debt, you will then owe the associated balance to the purchasing debt collector instead of your original creditor. The credit reporting agencies are alerted if a debt is sold to a third-party and your credit report will show a “charged off” account under the original creditor. 

A creditor is generally required to file a debt collection lawsuit against you before they can secure a judgment. A judgment is a court order that states the court’s decision related to the lawsuit. In the context of debt collection, the term “judgment” is also used to refer to the creditor’s court secured authority to collect on an outstanding debt using certain means. Once your account is overdue for many months, your creditor or a debt collector will likely hire a law firm to file a case in civil court on their behalf. When filing a case, they must follow the rules of civil procedure and pay a filing fee. 

After you are served with the lawsuit, you have the right to defend yourself or you can choose to seek legal advice and hire an attorney to represent you. If you ignore the lawsuit, then your creditor can get a default judgment against you. A default judgment  means that the defendant (the person being sued) did not respond to the lawsuit and gives the judgment creditor the same authority to collect a debt as if they had secured a favorable judgment on the merits of the case. 

You can defend against a lawsuit for unpaid debts even if you owe the debt. If you don’t respond to the lawsuit, the creditor will automatically secure a default judgment for the amount they claim you owe, which could be inflated. Also, if you defend the suit, you will have the opportunity to negotiate a lower amount owed. If you defend the suit, you may not win, but you may be able to work out a payment plan with your creditor.

There’s a time limit placed on when creditors may file a successful claim based on unpaid debt. This timeframe is called the statute of limitations. This time period is determined by state law. Your creditor can still file a lawsuit against you past this time period, but if they do, you can use the statute of limitations as a defense against the debt collection lawsuit. The statute of limitations defense can end the lawsuit. After that, your creditor will have no legal means to collect the debt from you. However, the amount owed will remain on your credit report for seven years after the date of the first missed payment. 

What Happens When a Creditor Gets a Judgment?

When a creditor secures a judgment, the debtor will face consequences. Once a creditor has a civil judgment for unpaid debts, they are referred to as a judgment creditor and the debtor becomes a judgment debtor. If you become a judgment debtor, the judgment creditor will ask the court for permission to take certain debt collection actions against you. The court will issue a writ of execution, which is a court order to enforce the judgment by levying (taking) money or property from the judgment debtor. With a writ of execution in hand, a judgment creditor can pursue a wage garnishment, levy a bank account, or get a property lien against debtor’s real property. 

Garnishment

A wage garnishment occurs when a judgment creditor takes money directly from your paycheck. This process is set up through your employer, who will then have to send a certain percentage of your paycheck directly to your judgment creditor. Federal law limits how much of your money can be garnished, which is based on disposable earnings – the amount of earnings left over after legally required deductions are made, like federal, state, and local taxes, social security withholdings, Medicare, and state unemployment insurance tax. A wage garnishment can be 25% of your disposable earnings, or the amount your disposable earnings are greater than 30 times the federal minimum wage. Certain types of income are not subject to garnishment, including Social Security income.

Bank Account Levy

A bank levy allows a creditor to legally take funds directly from your bank account. After your bank receives notification of the levy, it will freeze your account. At that point, you won’t be able to access your money. Your bank will then send the funds to your judgment creditor. A bank levy can happen more than once. Your creditor can levy your bank account as many times as necessary to satisfy the judgment – until the judgment is paid off in full. However, as with a wage garnishment, certain types of income are safe from levy. For example, levies against Social Security income and child support payments are not allowed. However, if these protected funds are commingled in one account, they may be seized and you’ll have to go to court to get them back. 

Property Liens

If you own property and a court judgment is obtained against you, a lien can be placed on your real estate and/or personal property. This is known as a judgment lien and it will be recorded with the county recorder, just like a mortgage or any other property lien. Once a lien is placed on property, it must be paid prior to selling or transferring the property before the title can transfer. It may, in some cases, be alternately paid off by proceeds from the sale. This is an uncommon approach to debt collection as it is an expensive route for debt collectors to take. However, it remains a possibility.

Credit Reporting

Civil judgments are reported to the major credit bureaus and will appear in your credit report. This negative reporting will affect your credit score. A lower credit score impacts your ability to borrow money. Credit or loan applications can be denied because of a low credit score, or if approved, will cost more because of high interest rates and annual fees. Note that if you raise a successful defense to the judgment, the negative reporting will remain on your history as long as the debt is valid (ie: didn’t result from identity theft or creditor fraud).

How Long Will the Judgment Last?

How long a judgment lasts depends on state law. While most judgments only last for 5-10 years, some may be renewed for longer than 20. After the effective time period passes, the remaining balance will no longer be owed. Most judgments are subject to renewal after a certain number of years. If the judgment creditor doesn’t renew the judgment when it first expires, then the judgment goes away at that time.

A judgment can be resolved in a few different ways. One way is to wait out the time that the order will remain effective. A judgment can also be resolved by paying the amount of money owed. Satisfaction of judgment will be issued after it’s paid in full. At that point, any wage garnishment or bank levy would stop and/or a property lien resulting from the judgment would be removed. Another way to resolve a judgment involves filing for bankruptcy protection. 

Bankruptcy and Judgments

Bankruptcy has the power to erase certain types of debts, including judgments for  credit card debt, medical bills, and other unsecured debt. Filing for bankruptcy will put an immediate stop to lawsuits for unpaid debts, wage garnishments, and bank levies. After filing for Chapter 7 bankruptcy, you might be relieved of personal liability to pay the judgment but the lien will remain against your property.

Conclusion

Judgments can arise out of unpaid debts and collection accounts. Judgment creditors have many serious debt collection methods at their disposal. Once a judgment is obtained, a creditor can garnish wages, levy bank accounts, or place a lien on property. How long a judgment lasts is decided by state law. In every state, judgments last for many years and some may be renewed for more than twenty years in total. 

One way to learn about your debt relief options is to complete a free credit counseling session. Upsolve's free web app enables filers to prepare Chapter 7 bankruptcy forms. If your case is particularly complex, you can typically locate a bankruptcy attorney in your area who provides free bankruptcy consultations so that you can learn more about your debt relief options.



Written By:

Attorney Jenni Klock Morel

LinkedIn

Jenni Klock Morel is a writer, nonprofit leader, and Social Justice Law Scholar. For years she practiced consumer bankruptcy law exclusively as a debtor's attorney, helping individuals and families file for Chapter 7 or 13 bankruptcy protection. Jenni left the practice of law to... read more about Attorney Jenni Klock Morel

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