What a Judgment on Debt Means

If you have unsecured debt and don't meet your payment obligations, your creditor can't take any of your assets without a lawsuit. If your creditor successfully sues you, it has a judgment against you and has the power to take some of your assets. This usually only happens if you have a large debt and your creditor believes that you can afford to pay off the debt.

Process

If you don't pay your unsecured debt, your creditor may take legal action and you may get a notice or summons from the court. The summons contains details of the court hearing and gives you the option of attending the hearing and presenting your defense. If the judge decides that your creditor has a valid case, you would get a Notice of Judgment, which gives you 30 days to pay off your debt. If you don't pay, your creditor may get a judgment execution order.

Collection Methods

A judgment gives your creditor the right to take your assets to pay off your loan. Depending on your state, your creditor may get a Writ of Garnishment, which allows a sheriff to take up to 25 percent of your wages until the debt is paid off. Most creditors attach a judgment lien to your real estate or other asset, allowing your creditor to collect its money when you sell or refinance your asset. In some cases, your creditor may take money from your bank accounts or take your personal property to sell at an auction.

Exemptions

The law protects some personal property from a judgment creditor. Most states allow you to keep some of your food, furniture and clothing. Most states also allow you to keep the equity you own in one vehicle, up to an amount determined by your state laws. You can also keep $10,000 to $50,000 of your home equity, depending on your state laws. You may also be able to keep your business assets and retirement savings.

Management

If your creditor threatens to get a judgment, you should try to contact your creditor to negotiate another way out. You may be able to negotiate lower late fees, lower interest rates or even reduced loan balance. You can also seek help from credit counseling agencies. If your creditor already has a judgment against you, there are several options. You can pay off the debt in full, negotiate to pay it in installments or let your creditor garnish your wages. You can also file for bankruptcy to reduce or eliminate your debt.