A debt judgment is when the creditor sues you for money and a court ruling for the creditor. Along with this, creditors can seize funds by official process through wage garnishment, bank levies, and liens on your property. Although it can be paid later after issuing a judgment, the article discusses post-judgment alternatives, settlement techniques, and what the creditors can do in enforcing judgment.
Knowing Judgments on Debt
Debt judgment is when you cannot pay back a loan or an outstanding debt and the creditor sues you in court. If the court rules in favor of the creditor or if you fail to defend yourself, the court enters a judgment on it. Judgment enables the creditor to go ahead and collect the debt, which includes:
Wage Garnishment: Payroll withholding
Bank Levies: Withholding money from your bank account
Property Liens: Putting a lien on your property, such as real estate
Even these enforcement proceedings can be initiated, it is not impossible that the debt may be paid subsequent to the entry of the judgment.
Can a Debt Be Paid After Judgment?
Yes, it will most likely settle the debt after it has been awarded a judgment. Though paying debt before the judgment is more convenient, creditors will normally still be willing even when they have prevailed in court. Creditors will instead settle a lump payment or payment plan rather than invest more time on slow collection processes.
Why Would Creditors Accept Settlement?
For creditors, pursuing collections after a judgment can be expensive and time-consuming. If you’re unable to pay the full debt, they may find it easier to settle for a smaller amount rather than deal with the challenges of wage garnishments or bank levies. They may be more inclined to negotiate if they think they will not recover the full debt.
Post-Judgment Settlement Options
Once you are in court, there are a number of things you can do to resolve the debt. These are your big ones:
Voluntary Payment Plans
Creditors will accept a payment plan, whereby they will permit you to repay the debt in installments over time. This can halt stricter collection measures such as garnishments or levies.
Lump-Sum Settlement
Sending a lump sum to the creditor to discharge a portion of the debt could convince them to settle. If the creditor is not sure whether they would be able to recover the entire debt, they will accept a reduced amount to bring the case to a close immediately.
Vacating the Judgment
In certain instances, you can get the judgment vacated or set aside if there was a procedural error, such as a failure to give proper notice of the suit. If you believe the judgment was incorrect, speak with a lawyer and have this as an option.
Bankruptcy
Bankruptcy will stop all collection under an automatic stay. Bankruptcy will discharge all debt, but there are exceptions like taxes or child support judgments that cannot be discharged. Bankruptcy is not a game, so call a bankruptcy attorney first.
Settlement Negotiation after Judgment
Settlement negotiation after judgment is smart planning. Use the following steps to make it easy.
Identify the Correct Party
Verify if the debt still belongs to the original creditor or has been transferred to a third-party collector. Your negotiating counterpart will be based on the party that holds your debt. Be sure that you call the correct party before this.
Negotiation Strategies
Make a Lower Offer: Start by making a lower offer, especially if you are in a cash-strapped situation.
Negotiate Favorable Terms: Except for a lesser sum, insist on favorable terms like the suspension of wage garnishment or foreclosure of property liens upon payment of debt.
Request Satisfaction of Judgment: Upon payment of the debt, ask for a “Satisfaction of Judgment” form indicating that the debt has been paid and prohibits collection in the future.
Request Legal Assistance
If negotiation proves to be too daunting, attempt to have the help of a debt collection specialist lawyer. Lawyers are better negotiators and will negotiate a far superior deal.
What Creditors Can Do to Enforce a Judgment
Should you default on paying the debt after the judgment, creditors possess several weapons with which to pursue the debt:
Wage Garnishment: The creditor can have money withheld from your paycheck directly.
Bank Levies: Creditors will freeze your bank account and send money to settle the debt.
Property Liens: A lien will allow creditors to claim some of the proceeds if you sell property.
Accrual of Interest
Judgments tend to accrue interest, and that will cost you even more money later on. The rate of interest on the judgment could be as high as 10% in certain states, which just makes it even more difficult to pay back.
Challenges for Creditors
Although creditors have enforcement power, they will not be able to recover the debt if the debtor does not have much property or income. Exemptions on a portion of income or property are provided by most states, making it difficult for the creditors to recover the full debt.
How to Prevent Further Penalties After a Judgment
Once a judgment is entered, it is best to do something to restrict its effect on your finances.
State-Specific Exemptions
Most states also offer exemptions that protect assets from creditors. States like, for example, offer homestead exemptions that protect a percentage of the equity in your house and wage garnishment exemptions to protect part of your income.
Reducing Credit Impact
While a judgment will remain on your credit report for seven years, settling or paying off the debt can help improve your credit over time. While the judgment will still appear, resolving the debt shows future creditors that you’re working to get your finances in order.
Getting a Satisfaction of Judgment
After paying the debt, it is just as necessary that the creditor execute a Satisfaction of Judgment with the court. The form is evidence the debt was paid in full and terminates collection efforts. Never forget to request a copy of this form for your file and have it recorded with the court.
Although a debt judgment is intimidating, it is not the end of the world. There are numerous ways to pay off the debt, from negotiating a payment plan or lump sum to bankruptcy. Moving quickly can avoid severe repercussions, including wage garnishment and bank levies.
No matter what you want to pay off the debt or file bankruptcy, you need to think of all your options and seek advice from a legal professional if needed. The sooner you settle the judgment, the better are your chances to minimize its long-term impact on your financial future.