How Can Creditors Enforce a Judgment?

When a creditor successfully sues you for nonpayment of a debt, the result is a judgment against you. When this happens, in addition to a legal order requiring you to pay the original amount due, the court usually includes court costs and fees your creditor incurs in filing the lawsuit. It is in your best interest to pay off a judgment as quickly as you can to prevent further legal action to collect the debt.

The Facts

Judgments creditors have a time frame in which they must collect on a judgment. This ranges from three years in Delaware to up to 25 years in Connecticut. In addition, some states, such as Arkansas, Kansas and New York, allow creditors to refile an expiring judgment. The result is that in most cases, the only way to make a judgment go away is by paying it.

Enforcement

Failure to pay leaves a creditor with a number of ways to enforce a judgment. Laws vary by state, but the most common include remedies filing a lien against any property you own, bank account seizure and wage garnishment. A property, or real estate lien is much like the lien your lender holds on your mortgage. This a long-term solution that ensures repayment as long as you sell at a profit. A creditor can also seize money in a single or joint checking or savings account, as well as stocks and bonds. Although some of your money is exempt, such as a portion of your wages, Social Security and unemployment income, if your bank turns over the entire account, it is up to you to defend the exempt amount in a court of law. A final way creditors can enforce a judgment is by wage garnishment. In most states, laws allow creditors to garnish 25 percent of your income, unless you are self-employed or below the poverty line.

Exception

The only time a creditor has no way to enforce a judgment is if the order is for an unsecure debt and you file for protection under Chapter 7 bankruptcy laws, listing the judgment creditor as a creditor. An exception to this occurs, however, if the judgment is the result of injury or property destruction due to an action on your part. If this is the case, the judgment stands.

Considerations

Judgments do not sit idly, waiting for you to pay. Every state allows creditors to add interest to the amount you owe. While each state has a cap on the amount a creditor can charge, this can significantly increase the amount you ultimately pay. Most states allow creditors to charge an average of 10 to 12 percent.