A judgement is a decision granted by a civil court against a debtor. It is filed by a creditor to collect a debt when the debtor is behind in scheduled payments.
There are several steps that must occur before a judgement is granted, and limited options for the debtor after the process is completed.
Why does a creditor pursue a judgement?
When a debtor is unable to repay a debt in a timely manner, the creditor will usually attempt to contact the debtor to determine the problem and possibly make arrangements for paying the arrears.
Some debtors will attempt to avoid the creditor's calls instead of explaining the reason for the late payments. This leads the creditor to believe that the debtor may be unwilling to repay the debt. Other debtors may simply be overwhelmed with debt or loss of income, and are willing but unable to repay the debt.
In either case, the creditor may feel that the only way to be repaid is to file a judgement in civil court for the amount owed.
What are the steps for a judgement to be granted?
The creditor files with the local civil court.
A process server must serve a summons to appear in court to the debtor.
The debtor and creditor appear in court, where the debtor can explain the problem and try to make an arrangement to satisfy the creditor and the court. If no agreement can be reached, the judgement is granted.
If the debtor fails to appear, the judgement is automatically granted.
What happens after a judgement is granted?
If the debtor is employed, the court will issue a garnishment of their wages. This is an order given to the debtor's employer to withhold a specific amount of wages from the debtor's pay to be paid to the creditor until the debt is paid in full.
If the debt is a secured debt, which is a loan on a specific item, the debtor will be required to surrender the item and repay the difference between the loan and the actual value of the item, which may have depreciated since the debtor purchased it.
How can a judgement be cancelled?
If the debtor can borrow enough money to repay the debt, the judgement will be satisfied. However, a judgement on a credit report makes it difficult to get additional credit.
The debtor can file for bankruptcy protection in federal court. Filing for bankruptcy brings an automatic "stay" on debt collection actions, meaning that all attempts to collect debts and civil actions such as garnishments must cease until the bankruptcy case is completed.
There are two options when filing for bankruptcy. Chapter 7 bankruptcy eliminates all debt, but the debtor must surrender all assets, including their home, vehicle, and any other assets that can be used to repay creditors.
Chapter 13 bankruptcy allows the debtor to keep their property, but a repayment plan is formulated to repay creditors as much as possible during a period of three to five years. After this period, all debts are considered paid and no further collection actions may be taken. Debtors can renew the house or car loans but they must pay them in full, separate from the monthly payments for other debts.
Either option will remain on the debtor's credit report for ten years, and make future credit difficult or expensive to obtain. However, bankruptcy allows for a fresh start when debt becomes too burdensome for a debtor to repay. Contact a company like Sinsheimer, Stuart J for more information.