What Is a Judgment and How Can It Affect You?

A judgment is a legal ruling that settles a dispute and outlines the terms of a debt, including the creditor’s right to collect through wage garnishment or property seizure.

A judgment is an order issued by a judge or jury to settle a lawsuit. This decision details the rights, responsibilities, and obligations of each party. For example, if you fail to pay a debt, the lender can take you to court. In this case, the judge may order you to pay the other party as part of the court’s final judgment.

The order can be issued in one of two forms:

• A monetary judgment: A judgment that orders one party to pay the other party a specific amount of money.
• A nonmonetary judgment: A judgment that involves a nonmonetary type of resolution, such as the exchange of property or services. For example, a contractor may be ordered to complete a service for a client.

There are several classifications for judgments, including:

• In personam: This is the most common civil judgment classification. It occurs when one party is liable to another.
• In rem: Rather than involving personal liability, in rem judgments hold liability over a specific item, such as property.
• Quasi in rem: Quasi in rem judgments consider the legal rights of individuals and not necessarily all parties involved.

Ultimately, if you don’t pay a debt, the lender or bill collector can file a lawsuit against you to recoup the money. The judge or jury determines if and how much money you owe. These terms are laid out in the final judgment.

What Is a Judgment on Property?

Your property includes both physical items and money. That means judgment creditors can seek debt payment from more than your wages and bank accounts. They may also take back a car you financed or other personal property. Another option is placing a lien on some of your property, such as your home.

What Property Can Be Taken to Settle a Judgment?

Creditors must follow the law when applying a judgment to take, or seize, your property. Some things are exempt—which means they can’t touch those items or properties. Some examples include the home you live in, the furnishings inside it, and your clothes. State laws identify these items and set limits based on their value.

Non-exempt property can be taken to help meet a judgment debt. Your creditor can take or leverage these possessions in the following ways:

• Wage attachments. This is known as wage garnishment. When your employer receives the proper legal notice, they must withhold a percentage of your wages. These payments are sent to the judgment creditor until your debt is paid. The Consumer Credit Protection Act caps these types of garnishments. The limit is 25% of your disposable weekly wages or the amount you earn that’s above 30 times the minimum wage. The lessor of these two amounts applies. Some states set the cap even lower.
• Nonwage garnishment. If you’re retired, unemployed, or self-employed, your bank account may be garnished instead. Here, too, there are exemptions. Veterans payments, Social Security, and disability benefits are not eligible for nonwage garnishment. Some states add even more restrictions to the garnishment of bank funds.
• Property liens. If you own real estate, your judgment creditor may file a legal claim against it. These liens notify lenders of the creditor’s rights to your property. That way, if you sell your real property, the debt must be paid out of the proceeds. In many states, liens are placed automatically when a judgment is entered.
• Property levies. Judgments may also allow some of your non-exempt personal property to be taken through a levy. Law enforcement may seize things like valuable collections or jewelry to be sold at auction. Sales proceeds are applied to your debt.

What Are the Types of Judgments?

Judgments come in many forms. Below is a look at the five types of judgments.

• Satisfied judgment: A satisfied judgment means the debt is settled. This doesn’t necessarily mean you have paid the debt in full. It could mean there’s a new payment arrangement, and you’re making regular payments.
• Unsatisfied Judgment: An unsatisfied judgment means the debt is not settled yet. You’re expected to follow the court order and make payments on the outstanding debt. Until you make your final payment or come to another agreement with the other party, it will remain an unsatisfied judgment.
• Vacated Judgment: If you don’t agree with the court’s initial judgment, you have the right to appeal that decision. If the judge decides to dismiss the case, the initial order becomes a vacated judgment.
• Summary Judgment: If both parties agree to the basic facts of the case, either party may request to skip the trial and go straight to a summary judgment. The judge issues this final judgment without going through the process of holding a trial.
• Renewed Judgment: Some states allow creditors to seek a new judgment for specific reasons. If this happens, the judge may issue a renewed judgment. This judgment may void the initial judgment or serve as an additional order.

3 Ways of Getting a Judgment

There are several ways a civil judgment can be determined.

1. Judgment After Trial

As the name suggests, a judgment after trial is a decision that occurs only after a trial. Once the judge or jury hears all the evidence and makes a final decision, the judge issues a formal judgment in the case.

2. Consent Judgment

A consent judgment occurs when both parties negotiate a final settlement. The judge must approve this final agreement, which is done by issuing a formal consent judgment.

3. Default Judgment

A default judgment occurs when the defendant fails to respond to a summons and complaint. In this case, the judge issues a default judgment in favor of the plaintiff without hearing any evidence from the defendant.

Can Judgments Affect Your Credit?

Judgments can’t directly impact your credit because the details of these orders aren’t part of your credit report. However, it’s likely that issues leading up to the final judgment could affect your credit. For example, your payment history can remain on your credit report for up to seven years. If you have any missing or late payments that led to the judgment, this history can impact your credit score.

A judgment could also have a positive effect on your credit. For example, once you’ve paid off the debt, the account balance should change to zero on your credit report. This could help lower the amount of debt you owe, which could impact your credit utilization rate.

What Is a Judgment on a Credit Report?

Judgments aren’t reported on your credit report and don’t directly impact your credit score. For many years, credit reports included judgment information. But that changed in 2017. The National Consumer Assistance Plan is responsible for creating more accurate credit data requirements. These changes resulted in the removal of civil debt judgments from credit reports.

However, judgments are public records, so lenders could still have access to this information through public records databases. This could affect your ability to secure credit in the future.

What Happens After a Judgment Is Entered Against You?

The court enters a judgment against you if your creditor wins their claim or you fail to show up to court. You should receive a notice of the judgment entry in the mail. The judgment creditor can then use that court judgment to try to collect money from you. Common methods include wage garnishment, property attachments, and property liens.

State laws determine how much money and what types of property a judgment creditor can collect from you. These laws vary. So, you need to look to your own state for the rules that apply. A consumer law attorney can help you understand your state’s laws on judgment collections.

What Happens When You Can’t Pay a Judgment Filed Against You?

You’re legally obligated to make these payments. If you can’t pay the amount all at once, you may be able to set up a payment arrangement. And if you own a limited amount of property, it may all be exempt from judgment collection efforts. Also, you may not work or only work part-time. With the CCPA cap, that may mean you don’t earn enough for garnishment.

This inability to pay your debt is called being judgment-proof, collection-proof, or execution-proof. While these circumstances exist, the judgment creditor has no legal way to collect the debt. It’s not a permanent solution. The creditor may revisit collection efforts periodically for many years.

For a more permanent solution, you may want to consider filing for bankruptcy. This process can discharge or eliminate most civil judgments for unpaid debt. Exceptions apply for things like child support, spousal support, student loans, and some property liens. Speak with a bankruptcy lawyer to learn whether this will help your situation.

What Is the Difference Between a Civil Judgment and a Criminal Judgment? 

A civil court typically involves disputes between two parties. For instance, it could involve a case between two individuals, two organizations, or one organization and one individual. These cases often pertain to a breach of contract, an unsettled debt, or a lack of services.

Unless both parties agree to the facts of the case, the judge gives each party the opportunity to present evidence. For example, if a debt collector takes you to civil court for an unpaid bill, you can provide evidence of any payments you made. After hearing the evidence, the judge issues a final judgment, known as a civil judgment.

On the other hand, criminal court involves someone accused of breaking the law. The federal, state, or local government charges the accused party. If, after holding a trial, the defendant is found guilty or the defendant pleads guilty prior to the trial, the judge issues a criminal judgment. A sentence is issued later, which could include jail time or some other form of punishment.

What Can You Do to Avoid a Judgment?

Heading off a lawsuit is the best way to avoid a judgment. To do so, don’t ignore calls and correspondence from your creditor. Reach out to learn if they’ll accept suitable payment arrangements. Educate yourself on smart ways to pay debt collectors, and consider using the services of a debt management agency.

What if the loan company or debt collector has already started the lawsuit? Don’t skip court. Show up and fight. You may win if the statute of limitations has expired.

If you haven’t made a payment on an old debt for many years, you may have a successful legal defense. Most states set the time frame between four to six years. Collectors often still file suit because they win by default if you don’t show up. So, it’s important that you go to court with proof of your last date of payment.

If you successfully defeat or avoid a judgment, don’t stop there. Take some sensible steps to help you get out of debt and stay out. Adopting these smart financial habits can also help prevent future judgment actions.

What Is a Judgment FAQ

How Long Can the Judgment Creditor Pursue Payment?

The answer depends on where you live, since state laws differ. Some states limit collection efforts to five to seven years. Others allow creditors to pursue repayment for more than 20 years. With the right to renew a judgment over and over in many states, it may last indefinitely.

Judgment renewals may be repeated as often as desired or limited to two or three times. This is another state-specific issue. Judgments can also lapse or become dormant. The creditor must then act within a specific time frame to revive it.

Can You Settle a Judgment?

If you can afford to pay a decent lump sum, you may be able to negotiate a settlement. The judgment creditor may be willing to settle if they fear you will otherwise file bankruptcy. Get the terms and settlement amount you agree upon in writing. Be sure the creditor agrees to file a satisfaction of judgment with the court after they receive your payoff.

Can a Judgment Be Challenged or Reversed?

Challenging and overturning a judgment is difficult but not always impossible. This is the case if there were errors. Perhaps you weren’t notified of the suit, or it was never your debt to begin with. Consult with an attorney to find out whether you have grounds to challenge the decision.

If you want to challenge a judgment, act fast. If you received prior notice of the case, you may have up to six months to reopen it. If you weren’t notified, you likely have up to two years to appeal. By reopening the case, you have the opportunity to fight the claim anew.

How Do You Find Out if You Have Any Judgments Against You?

You should receive a summons when you’re being sued. So, you can expect a default judgment will follow if you don’t show up in court. You can also expect a notification when a judgment is entered against you.

Mistakes happen, though. You may have missed the notice or moved to a new address. If that happens, you may not learn of the judgment until collection actions start.

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