Collection agencies do not need a judgment to attempt collecting a debt. A judgment is the result of a civil lawsuit for an unpaid debt. Usually it is the debt collector's final option for collecting. Debtors who refuse to pay a debt until a court orders a judgment are taking unnecessary risks. Judgments can lead to garnish of the debtor's bank account or wages, with some people forced into bankruptcy by multiple judgments. Resolving the debt before court action is a better option.
Effects
Court judgments appear in public court records and on the debtor's credit reports. Judgments remain on credit reports for seven years. There is no legal or ethical way to remove them despite the claims of some credit repair agencies. Paying the judgment results in updates to credit reports showing the judgment as a "paid judgment."
Notice
A debt collector taking on an account must send a written notice informing the debtor. However, the Fair Credit Collections Practices Act gives the debtor the right to ask the debt collector to provide proof that it has legal authority to collect the debt. Debtors can accomplish this by sending a letter to the debt collector within 30 days of receiving the written notice. In the letter the debtor can ask for proof that debt collector has the right to collect, such as a copy of the original credit application or a copy of the final billing statement. Federal law prohibits debt collectors from continuing collection efforts until providing the information. Providing the proof allows the debt collector to confirm the validity of the debt. Debtors concerned about a debt collector's right to collect should use this method and not wait for a court judgment.
Precautions
Challenging notices from debt collectors is important because debts sometimes pass from one collection agency to another. Some debt collectors work on commission, with the original creditor retaining the right to transfer the debt to another agency. Legally, debtors can force each new debt collector to verify the debt.
Default Judgments
In some cases debt collectors begin the collections process with a judgment. Debt collectors easily win so-called default judgments in court when a debtor fails to appear for a court hearing. "The New York Times" reports some debtors learn about lawsuits against them only after discovering garnishment of their bank account or wages.
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