Creditors have many tools at their disposal when trying to collect a bad debt, including placing derogatory marks on your credit report, turning your account over to a collection agency, and generally encouraging you to pay what's owed. One tool in particular, however, has more power than others. It's called a judgment, and it is granted by a court of law. If you have a judgment, you should know the following.
Your Creditor Has Power Now
If you don't pay a debt, creditors have little power to make you pay unless they petition the court to place a judgment against you. To get a judgment, a creditor must take you to court and give you the opportunity to defend yourself. If you don't show up, you automatically lose. If your creditor wins the case or if you don't show up, you should know that a civil judgment gives your creditor lots of power to come after their money.
Your Paycheck Is Not Safe
One of the ways a judgment helps your creditor is through wage garnishment. With a judgment in hand, your creditor can have your employer send a portion of your pay to them. Your creditor can take 25 percent of your paycheck or the portion of your earnings that exceeds 30 times the federal minimum wage.
While they have to take the lesser amount, they can still get a huge chunk of your check this way. As you can imagine, wage garnishment can wreak havoc on your ability to support yourself and your family comfortably.
Your Assets Are at Risk
If you are fortunate enough to own any assets, including property, savings, retirement accounts, stocks, etc., they are at risk. With a judgment in place, your creditor can seize your assets and liquidate them in an effort to collect the money that's owed to them.
Keep in mind that all sorts of property are subject to seizure, not just real estate property. Your car and recreational vehicles may also be at risk. Anything you own outright could be taken if it is allowed by law and your creditor chooses to do so.
A Judgment Does Not "Fall off"
Negative accounts reported on your credit report fall off after seven years. However, a judgment is different. In Indiana, a judgment remains in force for a period of 10 years. What's more, it is possible for your creditor to extend the judgment past the initial 10 year period if they renew it. Once renewed, the clock starts over.
Judgments may appear on your credit report for up to 10 years. When they fall off, that does not mean they are no longer valid. Judgments are obtained through the court system and reported on your public record. It is possible for a judgment to be active and on your public record while not showing up on your credit report.
There Are Remedies for a Judgment
Fortunately, there are ways you can fight a judgment even if you don't make the initial court hearing. You can contact the creditor and agree to a payment plan to stop all their efforts of wage garnishment and asset seizure.
If you cannot afford to pay, you can stop all collection activity by filing bankruptcy. You may even be able to wipe out the debt completely through bankruptcy proceedings, depending on the type of bankruptcy you file and your personal financial situation.
Judgments are particularly nasty and can be difficult to fight. If you have a judgment, you need a competent attorney on your side. Call Lynch & Belch P.C. today to schedule an appointment to begin resolving your judgment.