When you borrow money from a lender or creditor, you are legally obligated to repay it. Therefore, if you are not holding up your end of the agreement, the lender or creditor can sue you.
If the lender, creditor, or collection agency is successful in the debt collection lawsuit, it can result in a judgment against you. A judgment can have long-term impacts on your finances. Therefore, knowing how to check if you have an outstanding judgment against you can help you understand what to do about it.
What is a Judgment?
A judgment occurs when the creditor wins their case in court. It allows the creditor to pursue other ways to recoup the debt you owe, often including wage garnishment. A judgment also often includes interest and other costs, such as attorney’s fees. A judgment could be filed against you in several ways:
- You fail to show up in court: If the creditor files a suit but fails to appear in court or respond appropriately, the creditor will win the suit and, therefore, can file a judgment.
- The debt is legally yours: If you do take action on the lawsuit, but the court finds that you are legally obligated to the debt, the creditor can still file a judgment. This can happen even if you respond properly and appear in court. Generally, you will need more than an inability to pay as a defense to overcome a lawsuit.
What Can a Creditor Take When There is a Judgment Against You?
If a creditor is successful in obtaining a judgment against you, the creditor has some options as to the methods they take to recover the money owed. Sometimes, the creditor can come for your personal property. However, some property is exempt, including your house, furnishings, and clothes. But non-exempt property is fair game for the creditor.
Some examples of property that can be included in a judgment are:
Wages
One of the most common ways a creditor (also known as a “judgment creditor” once they receive a judgment) seizes property is through wage garnishment. In this case, the creditor will legally require your employer to hand over a certain percentage of your income each pay period.
This is generally about 10 percent of your gross wages per pay period. This varies between states. However, the debt collector cannot collect more than 25 percent of your weekly wages or the amount you earn that’s more than 30 times the legal minimum wage — whichever is lesser. The Consumer Credit Protection Act mandates this.
Nonwage garnishment
In addition to wage garnishment, the creditor can freeze your bank account instead. Normally, you would have no warning when this happens. You may find out by accessing your account and finding the funds frozen. However, certain exemptions exist here as well. Veterans benefits, unemployment, social security, and disability benefits cannot be garnished for private debt such as credit card bills. However, these benefits can be garnished for alimony, child support, and some student loan debt.
Property liens
A creditor can also place a lien on your real estate holdings. The creditor notifies lenders of the lien. Therefore, if you sell your property or try to transfer the property, you would need to satisfy the debt first. A lien against property can be automatic in New York when a judgment is obtained in the county in which the judgment is recorded.
Property levies
Property levies can include the judgment debtor’s non-exempt personal belongings. Items like jewelry and other valuables can be sold at an auction, with the proceeds going towards your debt. If the creditor issues a property levy, law enforcement could show up at your house and demand your property. This is called a “Writ of Execution.”
How Can You Check if There’s a Judgment Against You?
While it’s difficult to file a judgment against you without you knowing, it’s not impossible. A summons may be sent to you in the mail or delivered to you in person. If you don’t show up in court in accordance with the summons, a default judgment will be entered against you. Therefore, by intentionally not appearing in court, you can assume there is a judgment against you. You can double-check if a judgment was filed by calling the court on the summons. However, you will also be notified when a judgment is entered against you, which is done by mail. But, if you’ve changed addresses or accidentally disposed of these pieces of mail, you may not be aware of judgments. If this is the case, a debt collection activity or wage garnishment may be the first time you learn of it.
It’s also important to note that you cannot check for a judgment by pulling your credit report. You would need to run a judgment search through a title company or check the county recorder’s or court clerk’s office for court records. You may see a debt with an attorney’s office on your credit report. But you may not know for sure if there’s a judgment against you. Judgments typically last 20 years, so knowing if there’s one against you is important.
What Can You Do If There’s a Judgment Against You?
If you do have a judgment against you, there are only three ways to handle it:
1. Vacate it
If you appeared in court and the court ruled against you, vacating the judgment is unlikely. However, if you did not go to court and received a default court judgment, you may be able to challenge it, if you were not properly notified of the summons and complaint.
With the help of a lawyer, you can file a motion to vacate the judgment. In doing so, you’ll need to explain to the judge why you didn’t appear in court. If your motion is successful, you can contest the case.
A contested case often results in a more favorable settlement than a judgment. If you are already being garnished or started to pay towards the debt, you will likely be less successful in trying to vacate the judgment.
2. Satisfy it
If you’re not able to vacate the judgment, your next option is to satisfy it. This means you either complete the terms of the judgment (i.e., through wage garnishment or property lien) or come to a settlement.
Creditors will often agree to settle the debt for less than you owe, depending on the circumstances. However, this often requires a lump-sum payment.
Working with a financial attorney can be incredibly beneficial in negotiating with creditors to come to a settlement. An attorney can also ensure the judgment is properly disposed of and doesn’t become a problem for you in the future. Be sure to get all terms in a written agreement before you begin paying.
3. Discharge it
Your last resort can be to discharge the judgment in bankruptcy. However, bankruptcy can have disastrous long-term effects on your finances. Therefore, if possible, satisfying or settling the judgment should be your option.
A creditor can try to fight that by filing a response in bankruptcy court. Depending on the kind of bankruptcy you file, you could be forced to pay back a substantial amount of the debt. Speaking with a financial attorney can help you understand whether you have options other than bankruptcy.
The Bottom Line
A judgment can have a major impact on your life. A judgment could mean a loss of wages and property. And beyond that, it can cause difficulties in getting insurance, renting apartments, or even getting a job. A judgment can also take other people’s money if you share an account. Therefore, avoiding a judgment at all costs is in your best interest. If you’re struggling to pay off your debt, a debt attorney can help you avoid ever reaching the point of being sued. And if you are sued, ignoring the suit will only make things worse.
The team at Tayne Law Group, P.C. is here for you. We tailor our debt relief solutions to your specific situation and can help you navigate the tricky legal process. Call our law firm for a free consultation at 866-890-7337 or fill out our short contact form, and we’ll get in touch!
