Just as a debtor was unable or unwilling to pay the creditor on the debt that serves as the basis of a lawsuit to collect money owed, he will likely be in the same situation after a judgment is entered against him. Fortunately for debtors, the concept of debtor's prison no longer exists in the United States. Unfortunately for debtors, there remain other types of serious consequences for not paying or ignoring a judgment.
Creditors' Remedies Against Personal Property
Although judgment collection is largely a question of individual state law, certain aspects of the process remain similar from state to state. Generally, after a judgment is entered, there exists a period of time during which the losing party may file an appeal to a higher court. After the appeals period expires, the creditor can move forward with judgment collection. State law may give judgment debtors an opportunity to claim certain property as exempt from the judgment either automatically or by motion. All nonexempt property is subject to execution. Execution is the process by which the judgment creditor sends the sheriff out to seize the debtor's property and sell it to help pay the judgment. Cars, boats, tools, furniture and electronics above the allowed exemption threshold are all subject to execution.
Creditors' Remedies Against Real Property
In general, a judgment operates as a lien against a debtor's real property in any county where it is docketed. If the debtor has enough equity in the property above the exemption threshold to justify the expense and effort, the creditor can foreclose on the judgment lien and force a judicial sale of the property. Judgment foreclosures can cost creditors a sizeable amount of money, and since property typically won't bring fair market value at a judgment sale, the creditor may choose to forego the foreclosure option. The judgment still operates as a lien, however, so the debtor will not be able to sell or refinance the property without paying off the judgment in full.
Consequences for Debtor's Credit Rating
An unpaid judgment may show up on a debtor's credit report. This serves as a notice to all potential lenders that not only did the debtor get behind in payments, but the creditor actually had to file a lawsuit. This can translate into an inability to borrow money or increased interest rates, which can cost the debtor thousands of dollars in borrowing costs. Having a judgment also makes a debtor appear financially unstable or irresponsible, which can affect her ability to obtain employment in certain fields.
Bankruptcy Options
In some cases, a debtor may need to file for bankruptcy in order to protect his home or other important assets from seizure and sale by the creditor. While bankruptcy is not available to all debtors, both Chapter 7 and Chapter 13 automatically stay collection efforts upon the debtor's bankruptcy filing. The bankruptcy court will then include the judgment in the schedule of the bankrupt's debts and rule upon an amount, if any, for the debtor to pay. After completion of the bankruptcy case, the judgment can be discharged.
0 comments:
Post a Comment