What Happens When a Creditor Gets a Judgment in Its Favor?

Having failed to collect on a valid debt through other means, a creditor might choose to file a lawsuit in court in hopes that a favorable decision will be awarded by the judge. A favorable decision gives rise to the question of how the court will allow the judgment to be enforced. Since we no longer have a debtor's prison in the United States, the mere presence of a court's opinion that money is owed is not enough to always elicit automatic payment. Case in point --- the guilty verdict in O.J. Simpson's civil trial, in which he was found liable for millions and still has not paid a cent.

Judgment

A positive judgment is only the first step in the process of a creditor receiving money he is owed. The initial judgment means a legal court in the United States has decided the debt is valid and the creditor is owed the money as claimed. At this point, there are a few different directions the collection process might go.

Lien

The attachment of a lien to a debtor's property often follows a court judgment in favor of a creditor. The property normally comes in the form of a house, business or perhaps a car. Though passive in nature, a lien can remain uncollected for years until the debtor tries to sell his property, at which point the power of a property lien becomes apparent. It is difficult to sell property with a lien attached to it because, since the lien is attached to the property and not the individual, any buyer would be assuming the lien as his legal debt, which is not likely to happen. This encourages a debtor to pay his bill in order to sell his property.

Garnishment

Wage garnishment can sometimes be obtained by a creditor after a favorable court judgment. This means that certain percentage of the debtor's regular paycheck, legally capped at 25 percent, must be held by the employer and sent to the court for payment to the creditor. The garnishment will continue until the debt is paid in full. A garnishment doesn't have much effect if the debtor is self-employed --- only if he has a W-4 on file with an employer and receives a W-2 at the end of the year.

Execution

A more serious court decision is to issue an execution of judgment, which directs an officer of the court to go to the residence of the debtor, seize the property, and put it up for sale at auction. After paying court costs and those of the officer, the money netted from the sale goes to pay the creditor. An execution of judgment is not normally the court's first recourse, since it is so severe, but, in certain cases, it might be employed.

Payments

Any of the preceding judgment enforcement actions can put a serious crimp on the debtor's ability to conduct day-to-day financial matters. He is always free to contact the debtor and set up a payment plan to satisfy all or part of the debt. Another option is to file for bankruptcy, a legal process that might discharge all or some of the debt.