Is a Judgment Creditor a Priority Creditor?

When you do not pay your bills as promised, the creditor can sue you and ultimately obtain a civil judgment against your assets. But just because someone got a judgment against you does not necessarily mean they can become a priority creditor and easily collect upon the debt, especially if you have few assets or file bankruptcy.

Priority Creditor Definition

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, credit card companies and similar lenders are not considered priority creditors. So if someone files bankruptcy the only judgments that must be fully repaid are those associated with federal student loans, child support, recent tax debts, court fines or crimes.

Additional Considerations

If you do not file bankruptcy, then any creditors with judgments against you can try to garnish your wages or attach liens to your assets, warns the book "How to File for Chapter 7 Bankruptcy." In this case, you could be held financially liable for consumer-oriented judgments such as credit card debts. In this event, priority is assigned to the company who successfully sued you first. But if you owe tax debts, child support, federal student loans or court fines these obligations take precedence over any other type of judgment.

Credit Rating Considerations

In most cases a civil judgment, whether paid or unpaid, remains on your credit report for 10 years, notes the University of Minnesota Extension. The exact time frame depends upon your state of residence. If your wages are garnished to satisfy any creditor's financial needs, this fact will also damage your credit rating. Filing bankruptcy will absolve you of many debts, but will not erase any credit reporting associated with past-due accounts. Also, the fact that you filed partial Chapter 13 bankruptcy reflects on your credit rating for seven years and 10 years if you request full bankruptcy under Chapter 7.

Additional Laws and Regulations

Lenders cannot sue you indefinitely for past-due debts; this rule does not apply to government-oriented debts. Each state has a statute of limitations that controls the amount of time a creditor has to sue its citizens. If you live in Florida, your creditors have up to five years to sue you. If you live in Wyoming, the statute of limitations for lawsuits is eight years. If a creditor sues you outside of the statute of limitations, you must appear in court and inform the judge that the debt is too old for a judgment to be legally entered against you.