What Happens When You Lose to a Creditor in Court?

Debt plagues thousands of Americans each year, and unfortunately, many creditors take their clients to court in order to collect what the clients owe. The loss of a debt lawsuit is actually part of the initial stages of the formal collection process through the court. This is because it is only after the creditor has the judgment against you that it is possible to forcibly collect from you.

Filing of Finding

Following the loss of your case, the judgment against you is filed with the court clerk. This verifies the judge's findings so that any subsequent actions are based in formal documentation.

Subsequent Motions

After the judgment is filed, creditors usually file a motion to seize your property or other assets or to garnish your wages. The exact motions depend on the amount of the debt, whether you have other judgments against you and the debt collection procedures for your jurisdiction. These motions indicate the specific means of debt collection the creditor intends to pursue.

Writs and Notifications

If the motion filed by the creditor is within the scope of the initial judgment filed with the court, the court issues a writ authorizing the creditor to collect the debt as requested. The creditor sends you a notice of the writ, typically through the local sheriff or their attorney. Once you get a writ, you typically have some time to respond and appeal. An appeal won't necessarily stop the creditor from collecting, but it gives you the opportunity to negotiate. For example, you might ask that the amount of your garnished wages be lowered.

Hearings

If you have appealed any of the writs, you must go back to court to make a case for the appeal. The judge will investigate whether changes to the writ are warranted given your circumstances, and the creditor must continue to defend his claim.

Collection

If the judge denies your appeal, or if you let initial writs proceed with no contest, the creditor moves to execute the writ. At this point, your bank may freeze your accounts, your employer may deduct a portion of your pay or you may have to give back or liquidate assets.

Considerations

Any judgments made against you on behalf of creditors appear on your credit history. Because of this, if you lose a debt case, your credit score may go down. This can make it harder to get financing in the future, which impacts your economic stability and freedom. It is to your benefit to do what you can to build up your credit following a lost case for this reason. Additionally, although it is rare for a person to go to jail for having debt -- by itself, having debt is not a crime -- warrants of arrest can be issued if you end up in contempt because you ignore a writ.