What Happens When Someone Has a Judgment on Your Debt?

Creditors attempt to collect debts from consumers in a variety of ways. Some may send numerous debt collection letters, others may call repeatedly and some companies will use collection agencies to collect the debt for them. Should these methods fail, however, a creditor may seek a judgment against the debtor to force him to pay what he owes.

Facts

One debt recovery option available to creditors is to file a lawsuit against the debtor for the full balance he owes, plus legal fees and court costs. Should the judge in the case side with the creditor, a judgment will be levied against the debtor. Although the plaintiff in a lawsuit is required to serve the defendant with a summons notifying her of the hearing, should she neglect to show up in court to defend herself, the court will levy a judgment against her by default.

Significance

When a court grants a plaintiff a judgment, it provides the plaintiff with legal recognition that the debt is valid. In some states, this allows the plaintiff to begin involuntary debt recovery. Rather than appealing to the debtor for payment, the creditor may seek a court order for a bank levy, a wage garnishment or, in some cases, a property lien. Involuntary debt recovery forces an individual to pay what the court deems he owes--regardless of whether or not he wants to pay or agrees to the legitimacy of the debt.

Effects

After a court renders a decision against a debtor, the subsequent judgment will appear on her credit report. A judgment is a matter of public record just like a bankruptcy or foreclosure. Because it is directly related to an unpaid debt, lenders will likely consider it relevant when determining the individual's eligibility for loans or credit. Thus, the credit bureaus will list the judgment and the amount of the judgment, under the "Public Information" section of the debtor's credit report. A judgment has a negative impact on a consumer's credit score.

Time Frame

Judgments aren't enforceable forever. Each state has a statute of limitations that dictates how long a creditor has to enforce a judgment. After that time period, the judgment is considered invalid. Some states, however, allow creditors to renew judgments repeatedly in order to recover an old debt. The Fair Credit Reporting Act states that a judgment may remain on an individual's credit report for seven years or for the full duration of the statute of limitations in the debtor's state of residence, whichever time period is longer.

Considerations

If a consumer feels that a judgment was levied against him in error, he may have legal grounds to contest the court ruling. When a creditor files a lawsuit, it must follow the exact legal procedures that are specific for the debtor's state of residence. Failure to do so can result in the consumer appealing the court's ruling and having the judgment overturned. Individuals can have a judgment overturned in cases where the lawsuit was filed in the wrong district, the debtor was not properly served notification of the lawsuit or the debtor was a victim of identity theft.