There are few debts more onerous than a court judgment. Judgments mess up your credit score, typically have an extra-long statute of limitations and give your creditors a lot of power over you and your assets. If a judgment is entered against you for credit card debt, seek legal advice about how to proceed. Bankruptcy, protecting your exempt assets and settlement are all options to consider.
Collection Activity
After a credit card company or collection agency wins a judgment against you, it will try to collect the money you owe. In addition to letters and phone calls, your creditor can now try to seize your assets to satisfy the debt. For example, in many states, a judgment creditor can garnish your wages, levy your bank accounts and put a lien on your home.
Credit Reporting
Judgments are a matter of public record, and credit reporting agencies regularly add this information to credit reports. Judgments can seriously damage your credit score and hurt your chances of getting credit, getting a good interest rate or renting a home. It may even hurt your career, as many employers check credit reports before hiring or promoting an employee. Even worse, an unpaid judgment can remain on your credit report until the statute of limitations on judgment collections in your state expires. Since this can be a much longer period than the seven-year limit on reporting most negative credit information, an unpaid judgment can have a far-reaching effect on your financial future.
Protected Income and Assets
Some assets and income cannot be seized or garnished. While there are some differences between what assets states exempt from seizure by creditors, there are some sources of income that are protected by federal law. For example, income from unemployment benefits, public welfare benefits and Social Security benefits generally cannot be garnished or seized by a creditor if it is already in your bank account. You must inform the court that oversees the judgment, as well as the creditor, that your income and assets are protected from garnishment. Be prepared to document your claims by providing statements, letters and check stubs showing the source of your income.
Negotiation
Some judgment creditors may be willing to work with you to arrange a payment plan or settle the judgment for less than you owe. This is particularly true if you truly don't have the assets or income to pay the judgment and the creditor is concerned that you might file for bankruptcy. If you are able to pay most or all of the judgment, ask the creditor to move to have the judgment dismissed in exchange for your payment. When this happens, the judgment can be removed from your credit report.
Statute of Limitations
Each state sets its own statute of limitations for collecting debts, and the time for collecting debts may differ according to type. In most states, the statute of limitations on collecting a judgment is usually much longer than for collecting other types of debt. Courts may also renew the statute of limitations upon request, giving your creditor many years, even decades, to pursue you for payment of the judgment.
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