A credit card company may file a lawsuit against any account holder who fails to pay his credit card debts in a timely manner. If the court sides with the credit card company, it awards the company a judgment.
Significance
A judgment grants a credit card company additional collection rights beyond merely calling a debtor and sending demands for payment through the mail. Most states permit judgment holders to garnish wages and bank balances. In some states, a credit card company can even use its judgment to place a lien against a debtor's home or vehicle, according to the Santa Clara University website.
Time Frame
Each state possesses a different time frame over which a judgment is valid (see the Resources section). Some states, such as California, allow creditors to renew their judgments for a subsequent term as long as the creditor files for renewal before the initial judgment expires, explains the Sacramento County Public Law Library website. Once a judgment expires, however, the creditor cannot use it as a collection tool.
Effects
Judgments are a matter of public record. Once the court enters the judgment into the public record, the credit bureaus will retrieve it and enter it on the consumer's credit report. Credit card judgments are derogatory and can damage a credit rating.
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