What does it mean when a judgment is entered against you?
Here are 10 critical things you need to know about judgments:
1. Judgment picks a winner in a civil lawsuit.
A judgment picks the winner in a judicial contest. It is the determination of which side prevails, how much money is owed from the judgment debtor to the judgment creditor.
2. A judgment creditor can use law enforcement to collect.
Having won a judgment, the creditor can levy bank accounts, garnish wages, and install a receiver in a business in order to collect the debt. The creditor can make you show up in court and testify about your assets and their locations.
3. A judgment can grow after it’s entered.
The costs, fees and sometimes the attorneys fees a creditor spends to collect a judgment get added to the judgment. Judgments accrue interest as well. In Colorado, the statutory interest rate on judgments is 8%, far more than money earns anywhere else.
4. Judgments appear on your credit report.
A judgment is shown in the public records section of your credit report. Its effect is particularly strong, since it alerts the reader that some creditor already has a legal right to swoop in on your assets and your earnings, disrupting your ability to pay other creditors.
5. Go missing and you lose.
Unless you file a written answer with the court and show up to make your defense, a judgment can be entered against you without your side of the story. This is termed a default judgment. All that due process requires is that you get good notice that you are being sued. Do nothing and the plaintiff wins.
6. Default judgments may be set aside.
A judgment entered when the person sued doesn’t appear and defend is a default. Default judgments can be set aside for some period of time, depending on state law. Swift action is essential to get out from under a default judgment.
7. Judgments can be appealed.
A judgment isn’t final until the time period for an appeal has expired. Generally, you can appeal errors of law, but not the factual determinations that a trial court, or a jury, makes. You don’t get to introduce new evidence.
8. Judgments entitle the creditor to a lien on your assets.
A judgment lien is an interest in your property that follows the property wherever it is transferred. The lien is only released by payment or agreement with the judgment creditor.
9. Judgments are dischargeable in bankruptcy.
Debts reduced to judgments can be wiped out in bankruptcy just as the debt that lies behind the judgment could. Bankruptcy looks at the nature of the debt behind the judgment to determine if you can escape it, not to the procedural status of the debt.
10. Judgments die of old age.
Judgments have a life span provided by state law. In Colorado, a judgment in County Court lasts for 6 years, a judgment in District Court lasts for 20 years. Either can be renewed at the end of that period, but eventually, a judgment becomes unenforceable.