What Can They Do on Credit Card Judgments?

If a credit card company or collection agency cannot obtain a payment for unpaid credit card debt from a debtor, it may attempt to force the individual to pay through a judgment. Should the creditor be successful in securing a credit card judgment against the debtor, not only will the creditor be able to collect the debt through legal force, the debtor's credit report will reflect that a judgment was issued. This may prevent the individual from being eligible for new loans or credit cards.

Facts

Before a creditor can obtain a judgment for an unpaid credit card debt, it must sue the debtor in the debtor's county courthouse. After the lawsuit is filed, the creditor must notify the debtor of the lawsuit. The individual may then choose to appear in court and defend himself or ignore the notification. Should the consumer fail to respond to the creditor or fail appear in court, the judge will rule in favor of the creditor by default. If the debtor defends himself in court but loses the case, this will also result in a ruling in favor of the creditor. This gives the creditor the right to collect using a judgment.

Features

After the judge issues a judgment to the creditor, it can request a writ of execution. The U.S. Marshal's Service states that a writ of execution may be used to force the debtor to pay the debt involuntarily. This may be accomplished either through wage garnishment, a bank levy or a property lien. State laws vary regarding the methods creditors are allowed to take to collect a judgment.

Time Frame

A creditor hoping to obtain a judgment must adhere to the statute of limitations in the debtor's state regarding debt lawsuits. Statutes of limitations for debt collection dictate the amount of time a company or individual has to file a lawsuit over a debt. Once a judgment is granted, however, the statute of limitations for debt collection no longer applies. Judgments expire, usually after seven years, but a creditor has the option to repeatedly renew the judgment if the debtor has yet to pay. Some states limit the number of times a judgment may be renewed.

Considerations

Individuals who do not own property and are unemployed or live solely on government benefits are "judgment proof." A creditor may still obtain a judgment against a judgment proof individual, but the judgment cannot be collected due to the fact that government benefits are exempt from garnishment by any entity other than the federal government. If a judgment proof debtor informs the creditor that he owns no property and lives on government benefits, the creditor may choose not to sue or to drop an already existing lawsuit because it cannot recover either the original debt or its legal fees from a judgment proof debtor.

Warning

Some states, such as Connecticut, allow creditors who hold a judgment the right to force a debtor's home into foreclosure. This is because property liens in these states can be called due immediately rather than waiting for the homeowner to sell or transfer the property. Thus, the creditor may sue, obtain a judgment, place a property lien on the debtor's home and immediately call the lien due to use a foreclosure to obtain immediate payment of the credit card judgment.