The failure to settle the amount of a debt you owe will result in an outstanding judgment. What is an outstanding judgment? What can you do about it?
An outstanding judgment is a court decision or order awarding money to a creditor or lender following a debt collection lawsuit. It can be monetary or non-monetary. As a result, the creditor can garnish wages and seize non-exempt properties.
The debtor, on the other hand, can pay the judgment in full or installments. It is also possible to contest the decision in case of an error. Another option is to file for bankruptcy. The best recourse, however, is to settle the debt immediately.
Read on to learn more about outstanding judgment, including how it happens and what you can do to settle your obligations.
What Are Outstanding Judgments?
Borrowing money involves an agreement between the creditor and the debtor. If you fail to pay the debt based on the existing terms and conditions, the other party can file a lawsuit. When the court rules in favor of that party, it issues an outstanding judgment. It is a court order mandating you to reconcile your obligations.
No one wants a lengthy litigation procedure. So, before there is an outstanding judgment, the creditor will often exhaust other means to make you pay. If you do not give in to their demands, you leave them with no option but to bring it to the court, and this is when an outstanding judgment can be present.
How Do Outstanding Judgements Happen
There are two main ways by which the court issues an outstanding judgment. The first is when you do not appear in court. A proper response is necessary, often including an appearance. Otherwise, the creditor wins by default, making the court issue the outstanding judgment against you. The second happens after the failure to execute a timely response.
Types of Outstanding Judgments
The court can issue two main types of outstanding judgments, which dictate what the creditor can collect from reinforcing the order:
- Monetary: In this judgment, you need to settle the amount that you owe in monetary equivalent. You can pay it in lump sum or installments. The two parties can negotiate following a court order. This is the most common type of outstanding judgment.
- Non-Monetary: This is a court decision that instructs the debtor to complete a specific task instead of paying money. The creditor can collect non-exempt properties.
Statute of Limitations
The validity of outstanding judgments may differ from one state to another. Depending on where you live, the statute of limitation is anywhere from five to ten years. However, upon the expiration of the judgment, the creditor can apply for a renewal.
An outstanding judgment can also lapse. This happens when the creditor does not act to renew the judgment before it expires. Also, it can lapse when the creditor does not implement any action for the judgment execution within a certain time.
When the statute of limitation expires, the creditor can no longer garnish wages, seize properties, freeze bank accounts, or conduct similar actions.
Nonetheless, you are not still safe from paying what you owe. Depending on the state laws, the creditor can revive a dormant or expired judgment.
Interests and Other Charges
The longer it takes for you to settle the debt, the higher the amount will be. Over time, the debt accumulates interest. The interest can be set by law. In this case, this depends on state-by-state regulations. Alternatively, the interest can also be an amount agreed upon by the creditor and the debtor.
Aside from the accruing interest, other charges can also be present. For instance, you also have to pay court fees and legal counsel fees of the creditor. So, try to settle the debt as soon as possible to avoid unnecessary additions.
Paying Less than Your Debt
Are you in a bad financial situation but willing to pay the judgment debt immediately? In this instance, there is an option to settle your obligation for less. Consider yourself lucky if the creditor is willing to negotiate.
Make sure to have everything in writing. After reaching an agreement, a Satisfaction of Judgment will be applied by the creditor. This is a document showing a resolution to the matter.
What the Creditor Can Take
Since an outstanding judgment is legally enforceable, the law requires the debtor to pay the amount it owes. If the creditor cannot take money, it can enforce other remedies, including the following:
1. Request Debtor’s Examination
This is often one of the first steps that the creditors undertake in the unwillingness or inability of the other party to pay. It puts you under oath, putting pressure to answer questions truthfully. In turn, the creditor can determine how it can collect your debt.
2. Garnish Wages
It is one of the most common ways of seizing property to make you pay for your debt. It mandates the employer to deduct a specific percentage of your salary automatically. This will continue until the completion of the debt payment. However, you still have the legal position to dictate how much they must take.
3. Freeze a Bank Account
You might end up in shock, knowing that you can no longer withdraw money from your bank account. Often, it happens without warning. The creditor can run to the bank to prevent you from making different transactions until you settle your financial obligations.
4. Place a Property Lien
Another action that the creditor can undertake is to claim non-exempt properties. Meaning, you cannot sell or transfer the property that is under lien. The only time that you can do so is when there is no more outstanding debt.
How to Check Outstanding Judgments Against You?
In most instances, you will receive a letter, email, or any form of formal notification when you have outstanding judgment. You might also receive a call from a lawyer or law firm. Nonetheless, there are also instances when it might come as a shock knowing that such an order exists without your knowledge.
If you do not appear in court after being summoned, you can automatically assume the presence of a judgment.
More so, you can receive a garnishee notice. Often, this will come from your company’s payroll department. This is a notification of automatic salary deduction, which will go directly into paying off your debt.
Another thing that you can do is to check your bank account. While there are tons of reasons why it was frozen, one of the possibilities is that you have an outstanding judgment.
Some people might resort to checking their credit reports to see if they have a judgment. Nonetheless, as we will talk about later on, it no longer reflects in your history. Therefore, there won’t be any record.
Again, what is an outstanding judgment? An outstanding judgment is a court decision or order awarding money to a lender or creditor following a debt collection lawsuit. The judgment can be monetary or non-monetary. As a result, the creditor can garnish wages and seize non-exempt properties.
What to Do With An Outstanding Judgement?
The best action is to settle the debt as soon as possible. To avoid impacts on your long-term finances, do not wait for the court to issue an order.
When an order is already present, you have two main options to clear up your debt. The first is to pay in full or lump sum. You can pay the judgment debt in cash, check, money order, and direct deposit. Negotiate with the creditor to know which method works best for both parties.
Alternatively, you can settle the debt in installments. This is especially the case if you are in a bad financial situation and do not know the means. Often, this is an agreement between the creditor and debtor. However, there are also instances when you can request the court to intervene.
Apply Exempt of Property
Most creditors will immediately target your properties as a way to make you pay for your debt. While they can legally do so, you can stop them. The latter is possible by using certain exemptions.
In most states, the creditors cannot take away clothes, household furnishing, cars, and houses. However, while there are exemptions, they can still be taken away if you are still paying for these properties.
Can You Get Out of an Outstanding Judgment through Bankruptcy?
Yes, you can file a bankruptcy to dissolve any unpaid debt and relinquish outstanding judgments against you. If a court order has not yet been reached, a bankruptcy automatically prevents the process from moving forward. More so, even if there is already a judgment, it may be discharged through bankruptcy.
Nonetheless, there are some qualifications for the disqualification of an outstanding judgment. Exceptions are in the form of non-dischargeable debts. Some examples of the latter include criminal penalties, student loans, and malicious injuries that the debtor caused. With this, bankruptcy isn’t always an easy way out.
While bankruptcy might sound like a good idea, consider the long-term effects on your finances. It is a record that remains in your credit history up to the years. Therefore, a lower credit score will make it more difficult to secure a loan or apply for a lower interest rate. Additionally, it can have an impact on your employment.
Challenging or Reversing an Outstanding Judgement
Most of the time, the court decides with finality once it issues an outstanding judgment. It is prudent enough to go through all documents and examine the case before concluding.
Nevertheless, it is possible to overturn the court’s order. All that you have to do is to prove the existence of an error. For instance, you might not have received a notification of the lawsuit. Also, it is a possible case of mistaken identity. You might have six to 24 months to appeal and reopen the case, depending on state laws.
Work with a Lawyer
Perhaps the best thing you can do with an outstanding judgment is working with a lawyer. This way, you will gain legal guidance. An expert can help you navigate the ins and outs of the court order, providing insights on what your next step must be.
Outstanding Judgements and Credit Reports
At one point, an outstanding judgment reflects in your credit report. This is a burden if you plan to apply for a loan. You will appear less attractive in the eyes of the lender. Therefore, it minimizes the chances for approval, or you will have higher interest rates.
However, this is no longer the practice today. This change took effect in 2017 through the National Consumer Assistance Plan. Under the latter, credit reports exclude civil outstanding judgments.
Nonetheless, this does not mean that you can rejoice. Judgments are public records, and hence, they can still appear. Your name, address, social security number, and date of birth are necessary to obtain the record.
What To Do if It Is Still in Your Credit Report
If you can still see the outstanding judgment in your credit history, dispute it. Call the credit reporting agency to remedy the problem. Most of the time, it is simply an oversight on their part. Alternatively, you can also work with credit repair services.
Conclusion – Outstanding Judgements [What are They, How to Check, What to Do]
An unsettled debt is a nightmare that can haunt you. The creditor will need mostly likely exhaust all possible means to make you pay, including bringing the case to court. As a result, an outstanding judgment can be issued against you when the court rules in favor of the other party. This is a court order mandating you to settle your obligations legally.
When you have outstanding debt, the court will send a summon through a letter or email. You can also check the court records to see if there is any case pending. Meanwhile, you can settle these obligations in full or in installment as agreed upon.
Several remedies are available for outstanding judgments. For instance, you can negotiate to pay less. Another possibility is to challenge or reverse the decision, especially if there were serious errors. Bankruptcy is also a common solution, but take note of its lasting impact on your financial health.