Being in debt is never pleasant for anyone, especially when a creditor sues you and wins a debt collection judgment in an attempt to collect from you whether you have the money or not. 

A collection judgment against you is stressful no matter how you look at it. Ignoring it won’t make the situation simply disappear. Depending on your specific situation, you can get help to determine which steps you to take next. 

What is a Debt Collection Judgment?

What is a debt collection judgment? It’s the ruling court order giving a debt collector the authority to collect any outstanding debt by necessary means. Typically a debt collector files a collection lawsuit in an effort to force the individual to pay up. 

However, just because the court has ordered you to pay does not mean the money magically appears in their hands. Often people struggling to cover debt don’t pay simply because they lack the funds. Companies won’t receive their payment if hard times have truly rendered you unable to pay.

Collection Judgment Process

Prior to being ordered to pay by a debt collection judgment, there is a required process. When you have a payment that goes unpaid, you receive letters or calls from the creditor as more time passes. Eventually, the debt is turned over to a collection agency, which then sends more letters or calls repeatedly in an attempt to collect the debt.

If the debt is not satisfied, it could be given to an attorney because the company or individual plans to file a lawsuit against you. Upon receiving your notification, you have a certain period of time to respond to the formal Complaint against you. 

What Happens Next

If you don’t respond or lose, then the ruling will be in favor of the debt collection agency. Once issued and indexed by the clerk of court, the collection judgment will appear on your public record, credit report, and all background checks. Any lien filed against your property holdings is only effective if filed in the same state. 

The creditor can use several methods of retrieving funds to satisfy your debts. Some options include:

Garnishment of wages

In this instance, the owed money can be taken directly from your paycheck. It’s typically a percentage of your wages that you will be unable to control until the debt is settled. If you are the agency wishing to use this method of debt repayment then you need to utilize the services of a lawyer.

Bank levy

A court-approved bank levy freezes the funds in your bank account until the debt has been repaid. The creditor may or may not notify you prior to the levy. If a creditor suddenly levies your account and drains it of all your funds, then you have been subjected to “gutter service.” This is a commonly used method of providing the lawsuit papers to a messenger, only to have them tossed in the “gutter.” Yes, your bank account can be drained to the very last penny. 

Judgment lien on real estate

After a lien certification is placed on any property you own, it stays in place for 20 years. It’s initially recorded for ten years, then rerecorded for another ten years in the Official Records of the Clerk’s Office. Since homestead property is exempt from being taken, the debt must be satisfied before it can be sold. 

Judgment lien on personal property

A judgment lien on personal property must be filed in the same state. For example, the property must be located in Florida and filed with a Florida court. This type of lien is filed with the Department of State and only valid for five years. After this time period has passed, the creditor must obtain another judgment lien.

Execution & satisfaction

Nonexempt property can be seized. After seized, the property is sold and the creditor paid from the proceeds. This act is known as an execution of judgment. The creditor is responsible for any fees that result from an execution of the collection judgment. Upon the satisfaction of the debt, a record of satisfaction will be mailed to you or the person who paid the debt.

Your Options

Once the judgment has been finalized and filed with the court, you will be required to pay the debt. However, if you are unable to pay the balance in full, you can work with an attorney to explore your options. Here are a few to consider:

Avoid your bank account

You won’t be able to use your bank account if it is frozen with a bank levy. There are other methods for cashing your paycheck and paying your bills until you pay the past due balance in full.

Contest the lawsuit

Under certain conditions, you can contest the judgment or file an appeal. There is a possibility the collection judgment can be reversed. Since laws differ from state-to-state, it’s best to consult with a local lawyer.

File bankruptcy

When a creditor drains an individual’s bank account, sometimes people are unable to pay for their rent, food, and other bills. If debt is forcing you into overwhelming hardship, consider contacting a bankruptcy attorney. There are many things to consider before filing bankruptcy. A bankruptcy attorney can help you decide whether a Chapter 7 or Chapter 13 bankruptcy can benefit you with your particular situation. 

Lapsed Judgment

When a creditor doesn’t renew a collection judgment, it is no longer enforceable by law. This doesn’t mean it’s gone forever because some lapsed judgments can be revived. A creditor can still reach out regarding an old debt but legally, they can’t take any other action to force you to settle the debt. For instance, they can’t garnish your wages. 

In Conclusion

According to the Fair Credit Reporting Act (FCRA), the collection judgment may remain on your record for at least seven years and even up to 20 if the creditor renewed it as per required by law. When you have all of the necessary details, you can make a more informed decision. A professional attorney will work with you to determine the best course of action to settle the collection judgment against you.