Timeline of a Consumer Debt Lawsuit: Collecting the Judgment

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In our series Timeline of Consumer Credit Lawsuit, we've talked about what happens before a lawsuit is filed, the course of a lawsuit, and steps the parties can take after the judgment is rendered to challenge the judgment. In this article, we discuss how creditors use judgments to collect on debts.

Recording the Judgment in the Real Property Records

The creditor’s first action will generally be to file the judgment in the county property records for the county in which the defendant resides or owns property.

The property records are public, meaning anyone can see them. This puts the world on notice that the creditor has a judgment against its borrower.

The judgment also serves as a lien against the defendant’s property. The lien is similar to the rights your car creditor has in the car you’re financing. But the judgment will act as a lien against all of the your property, including real estate listed in the property records, real estate not listed in the property records and all personal property, including cars and even clothing and dishes in the cupboard.

Using the Judgment to Collect

    Post-judgment Interrogatories

After the judgment is taken, the creditor will often send the defendant a new set of interrogatories. These interrogatories are designed to elicit information about the defendant’s assets, including real estate, personal property, bank accounts and wages.

If you fail or refuse to answer the interrogatories, the court can hold you in contempt of court and fine you a significant amount of money, although the court will not usually throw you in jail on a civil contempt charge.

    Settling the Judgment

Although creditors have several tools at their disposal to force payment of the judgment, most creditors would prefer to negotiate a settlement with the defendant even at this late date. Active collection using the tools we describe can be expensive and often fail to generate enough proceeds to actually pay the debt in full.

It is almost always in the defendant’s best interest to attempt to work out a payment plan or offer a lump sum settlement on the judgment.

    Levies

If you cannot or will not work out a compromise or a payment plan, but you have some assets that could be used to pay the debt, the creditor has options.

First, it can sit and wait until you sell property, especially real estate. When you receives an offer on property, a title company will review the property records to ensure that you have the right to sell it. During this review process, the title company will see that a judgment was filed. The title company will then require that you clear up the judgment  - either with proceeds of the sale of the property or out of your pocket - as a condition of issuing title insurance for the sale.

Second, the creditor can go back to court and ask that property be sold to pay the judgment. This is called a levy. The levy usually orders that the sheriff in the county where the property is located take possession of property, sell it and turn the proceeds of the sale over to the creditor. That could mean that the sheriff puts the real property up for sale or actually goes into a person’s residence and removes personal property to sell.

    Garnishments

When the property belongs to the defendant but is in the hands of someone else, the court will issue a garnishment. If the creditor wants access to your bank account, it asks the court to issue the garnishment to the bank. The court can likewise issue a garnishment for wages to your employer.

For more information on how garnishments work or how to handle them, see What is a Garnishment? and How to Handle a Garnishment.

Judgments and Credit Reports

People are often motivated to settle judgments when they show up on their credit reports. The creditor doesn’t even have to report the judgment to the credit bureaus. The credit bureaus routinely review property records and add judgments to their databases. Whenever someone makes an inquiry of your file with a credit reporting agency, the judgment will show up.

It may remain there even after it is satisfied, even though it may have a notation attached to it that it has been satisfied. In many cases, the judgment will drop off the credit report after seven years, but in some instances it may remain on the credit report as long as it is an active and executable judgment.

Duration of Judgments

Judgments are usually active for ten years. In some states, they are active for a few as five years; in others for as long as twenty. In many states, the judgment can be renewed for an additional term.

For more, visit:

Timeline of a Consumer Debt Lawsuit: Pretrial and Trial

Timeline of a Consumer Debt Lawsuit: Before the Lawsuit is Filed 

Timeline of a Consumer Debt Lawsuit: Motions and Appeals