In our Timeline of Consumer Credit Lawsuit series, we discussed what happens before a lawsuit is initiated, the course of a lawsuit, and the steps the parties can take after the judgment is made against the decision. In this article, we discuss how creditors use judgments to collect on debts.
If you lose your lawsuit, the court will enter a judgment, which is a formal court decision. If the judge has been awarded money to the other party, it will sum the judgment of the amount, interest accrued from the time the case is filed, and the interest. The ruling may also order you to take a number of steps or to refrain from taking some action. For example, you can be ordered over certain property to turn to your opponent or to pay fees and expenses from your opponent’s lawyer.
Once the judgment has been delivered by the court, there is usually a period of time in which the parties can appeal the decision to a higher court. The ruling was not considered final until that time had expired.Once final, the creditor’s first action will generally be to submit judgment in the county property records for the county where you live. The property records are public, which means that anyone can see them. This puts the world on the announcement that the creditor has a judgment against you.
The judgment also serves as a lien against your home. The collateral is similar to the rights your car creditor has in the car you are financing. But the judgment will act as a lien against all of your property, including property records listed real estate, property not included in property details and all personal property including cars and even clothing and dishes in the closet.
Once the decision has been made, the creditor may ask you a number of questions to send you questioning requests. These interrogations are intended to obtain information about your assets, including real estate, personal property, bank accounts and wages.
If you fail or refuse to answer the questionnaires, the judge may hold you in contempt for the court and fined you a substantial amount of money, although the judge will usually not throw you in jail on a civil contempt charge.
Although creditors have different tools at their disposal to force the payment of the judgment, most creditors would prefer to negotiate a settlement with you even at this late time. Active collection using the tools we describe can be expensive and often fails to generate sufficient income to actually pay the debt in full. It is almost always in your interest to try to work out a payment plan or offer a lump sum settlement on the judgment. If you can’t or don’t want to work out a compromise or a payment plan, but you need some assets that can be used to pay the debt, the creditor has options.
When you receive a quote on real estate, a title company will review the property records to ensure that you have the right to sell it. When reviewing, the title company discovers the decision and require you to clear the judgment as a condition for issuing the title insurance policy for the sale. You can erase the judgment with the proceeds from the sale from your pocket, or by assuring yourself of an agreement with the creditor to release the judgment.
Second, the creditor can go back to court and request that property be sold to pay the judgment. This is called a charge. The charge usually orders that the sheriff in the province where the property is located take possession, sell and turn the proceeds from the sale on to the creditor. That could mean that the sheriff puts real estate for sale or actually removes personal items to sell. Due to the cost and difficulty of finding and securing personal property.
When the property belongs to you but is in the hands of someone else, such as your bank account at the bank, the court will give a third-party attachment. If the creditor wants access to your bank account, the court requests that the attachment be handed over to the bank. The court can also give a third-party attachment for wages to your employer.
For more information about how garnishments work, see What is a Third Party Seizure? and How to Handle a Third Party Hardware.
People are often motivated to comply with judgments when they appear on their credit reports. The creditor does not even have to report the judgment to the credit bureaus. The credit bureaus routinely review property records and add judgments to their databases. When someone makes an investigation of your file with a credit reporting agency, the judgment will show up. It can stay there even if it is a notation attached to it that it can be satisfied. In many cases, the judgment will finish off the credit report after seven years, but in some cases it can stay on the credit report as long as it is an active and enforceable judgment.
Judgments are usually active for ten years. In some states, they have been operating for as little as five years; in others for as long as twenty. In many states, the verdict can be extended for a new term.
Can you get rid of a judgment or stop a third-party attachment by filing for bankruptcy? A bankruptcy can stop a third-party attachment, but it will only get rid of a judgment if the debt is discharged in the bankruptcy. Read more here about what can be discharged and what will survive bankruptcy.