Just How Long do Judgments Stay on Your Credit Report?
A creditor securing a judgment against you is a scary idea — which is probably why we get so many reader questions about it. A judgment results in a legal obligation to pay a debt. A judgments results when a creditor or collector sues you over an outstanding debt and wins. But, that win isn’t necessarily written in stone.
Judgments can be appealed, reversed, amended, or even, settled for less. The ultimate outcomes depends on the circumstances and what steps you take. The first step is to consider contacting a consumer attorney. Some offer free consultation. And some will take your case for free if they think a collector broke the law.
If you’re dealing with a debt collector, are facing a judgment, or have a judgement already, here are some answers to questions you may have along with next steps.
How Does a Creditor or Collector Get a Judgment Against You?
To get a judgment against you, a creditor or collector has to take you to court. If you don’t respond to a summons, or if you lose the case, the court will issue a judgment in favor of the creditor or collection agency. The judgment will be filed with the court. Once that happens, the judgment is public record and will affect your credit reports. Check your credit for judgments by getting your free credit score and report card on Credit.com.
How Are Judgments Collected?
If a judgment is made against you, creditors get access to more ways to collect from you Depending on your state’s laws, these ways can include going after your bank accounts or other property or trying to garnish your wages.
As the National Consumer Law Center points out in its book, Surviving Debt, “Even if you lose a lawsuit, this does not mean you must repay the debt. If your family is in financial distress and cannot afford to repay its debts, a court judgment that you owe the money may not really change anything. If you do not have the money to pay, the court’s judgment that you owe the debt will not make payment anymore possible.”
If you aren’t sure what a creditor can do to collect from you after a judgment, it’s a good idea to consult with an attorney. The attorney can help you understand what you risk if you don’t pay. The attorney can explain what property you own that is exempt, or safe, from creditors.
You can also check out this article on how to get out of debt.
What Property Can be Taken to Settle a Judgment
The property that a creditor can take from you to settle a judgment varies from state to state. However, a creditor can take (or garnish) up to 25% of your net wages, which includes your bank and other deposit accounts property, such as cars or antiques.
Each state outlines which property is exempt from a judgment. Property that is exempt means it is completely off-limits for settling a judgement.
The statute of limitations for debt also varies state to state. If you find that you don’t have much in the bank or property that could be seized, you may find that much of what you own us exempt.
Other items that can be used to settle a judgment include:
Wage attachments are also called wage garnishment. They are one of the most common techniques that creditors will use to collect on a judgment. Your employer takes a portion or percentage of your wages and sends it directly to the creditor before you receive any money.
Property liens are another common method of collection. A lien in placed on real property that you own. Liens will last from a few to several years. When you decide to sell or refinance your property after the lien is created, you have to pay off the judgment creditor first and will only receive the difference between the lien and the sale value.
Property levies are ordered by the judgment and let the credit go after your personal property. Creditors use a sheriff or other officer to take your property and sell it at public auction. Proceeds from the auction are applied toward settling your judgement.
Tax liens are when the government places a claim on your property. They come into play when a taxpayer fails to pay taxes that are owed. A tax lien doesn’t necessarily mean they can take your property, but the government has first right to your property over other creditors to pay any debt that is owed.
Can a Judgment Be Reversed?
Sometimes. You can ask the court to re-open a judgment or file an appeal. It’s also possible to have the terms of a judgment altered. And, with a few exceptions, a judgment can be discharged in a bankruptcy.
However, laws, and the timelines or statute of limitations affecting them, vary by state. So, if a creditor secures a judgment against you, it’s in your best interest to consult an attorney. Find more about your legal rights post-judgment.
Can I Settle a Judgment?
The answer to this question is ususally, “yes.” Most judgment creditors realize tha collecting on a judgement is difficult, especially if the debtor doesn’t have wages that can be garnished or property that can be seized. If you’re able to get a lump sum of money from, say a relative, you can offer to pay of the judgment at a lower cost.
Just make sure you get any agreement in writing before you pay. Make sure the agreement spells out all the terms of the settlement, including the fact that you don’t owe any more money after you make payment.
Can I Avoid a Judgment?
You can try and settle the debt before a credits pursues a court case. The creditor may be willing to settle for part or all of the money you owe. Of course, that only works if you can find money to pay them.
If you can, make sure you have a written agreement from the creditor that states that they won’t pursue the debt in court if you make the payment as agreed. Then, check with the court to make sure the matter is dropped.
How Long Do Judgments Stay on a Credit Report?
Unpaid judgments remain on your credit reports for seven years or the governing statute of limitations, whichever is longer. Before July 2018, once a judgment was paid, the court had to remove it from the record seven years after the date it was entered. As of July 2018, though, the credit bureaus exclude judgments that don’t contain complete consumer details or haven’t been updated in the last 90 days. Learn how long other items stay on your credit report.
How Long Can Judgments Be Collected?
The statute of limitations for collecting judgments varies by state and is typically from 10 to 20 years. In addition, in most states the statute of limitations can be renewed. For that reason, it’s best avoid a judgment in the first place. If you can’t, it’s best to try settle it quickly.
Can I Be Charged Interest on a Judgment?
Yes. In most states, interest may be charged on a judgment, either at any rate spelled out in state law or at the rate described in the contract you signed with the creditor. Also, the judgment may include court costs and attorney’s fees.
What Else I Should Know About Judgments?
A debt collector that threatens to get a judgment against you, to garnish your wages, or seize your property may be breaking the law. Talk with an attorney to find out if they credit is justified.
If you haven’t heard anything about a judgment for a time, don’t assume it’s gone away. It’s possible that the creditor could decide to collect from you again later.
Plus, an unpaid judgment can prevent you from buying a home or getting credit at a lower interest rate. So, it’s a good idea to try to resolve the judgment, either by filing for bankruptcy or by paying off or settling the judgment when you’re able to.
When interest starts to build on a judgment, the amount of your debt can almost double in value. Whenever possible, pay or negotiate and adjustment to the judgment as soon as possible. Once the judgment is paid off, the creditor will file what’s known as a satisfaction of judgment with the court. The creditor will typically fulfill this step, but you can do it yourself too.
Do what you can to avoid an unsatisfied judgment that will affect your credit and damage your credit history.
When a judgment is vacated judgment, it is essentially voided. A vacated judgment is different than a satisfied judgment and is almost as if the initial judgment never existed. If you can get the judgment voided, get the courts to file it as vacated as soon as possible. This will ensure that the negative information about the judgment is removed from your credit reports.
A judgment that has been vacated can’t be reported to a credit bureau. And a judgment creditor can’t collect on a debt that technically does not exist which means it also shouldn’t affect your credit.
Remember, when dealing with debt collectors, it pays to know your rights. Learn more about your rights in the Managing Debt Learning Center.
This post is intended to provide educational information, not legal advice. Please consult an attorney for legal advice.
This article was originally published April 20, 2017, and has been updated by another author.
Image: walknboston, via Flickr.com
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