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In a NutshellWhen a creditor wins a lawsuit against you, the court issues them a judgment. This allows them to take serious collection actions like wage garnishment. The length of time the judgment is enforceable varies depending on the state you live in. In some states, it’s as short as five years, and in other states, it’s as long as 20 years. Judgments can also often be renewed. If you can’t afford to pay a judgment against you, filing bankruptcy can help eliminate the judgment.
If you fall behind on your credit card bills or loan payments, the creditor or lender can sue you for the unpaid debt. If the creditor wins the lawsuit, they’ll get a court judgment. This allows them to take more extreme debt collection actions. The calls and letters demanding payment might slow down. But a creditor or debt collector with a court judgment can now garnish your wages and bank account. They can also put a lien on your property.
If a creditor gets a judgment against you, it could remain in effect for up to 20 years. In many cases, it can also be renewed. The exact time frame depends on which state you live in and the type of judgment. You can get rid of a judgment by paying the money you owe or filing for bankruptcy protection. Read on to learn more.
A judgment is a court order that states the court’s decision for a lawsuit. If a creditor gets a judgment against you, there can be serious consequences. Simply not showing up to court when you’re sued doesn’t mean a creditor can’t get a judgment against you. In fact, they’re likely to get a default judgment.
Once a creditor has a civil judgment for unpaid debts, they’re called a judgment creditor. The debtor is called a judgment debtor. If you become a judgment debtor, the judgment creditor will ask the court to issue a writ of execution. This gives the creditor permission to take certain debt collection actions against you. With a writ of execution in hand, a judgment creditor can pursue a wage garnishment or bank account levy or get a lien against your property. More on each of these later.
State law dictates how long a money judgment lasts. In many states, judgments only last for 5-10 years. But in some states, like New York, judgments remain enforceable for 20 years. In some states, different kinds of judgments have different time limits. Judgments against personal property may have a different time frame than a judgment lien against real property.
Also, many states allow judgment creditors to renew judgments. For example, judgment creditors in Idaho have five years to collect on a judgment. After five years, they can renew a judgment for an additional five years. Some states only allow judgment creditors to renew judgments once, while other states allow them to renew judgments indefinitely. To find out how long a judgment lasts in your state, you can contact your state court, a local legal aid office, or your state’s attorney general.
With all judgments, after the enforcement period passes, you’ll no longer owe the remaining balance. If the judgment creditor doesn’t renew the judgment when it first expires, then the judgment goes away at that time. In some states, the judgment can be revived years later with a simple application for a judgment renewal.
Under the Fair Credit Reporting Act, judgments and liens can stay on your credit report for seven years or until the statute of limitations lapses, whichever is longer. But starting in July 2017, the three major credit bureaus agreed to remove and stop reporting civil judgments on consumer credit reports.
But it’s still important to remember that judgments arise from unpaid debt. When you miss or fall behind on debt payments, you’ll seriously harm your credit score. If the original creditor or lender charged off your debt or sold it to a debt collection agency, that negative item can remain on your report for seven years. Essentially, when it comes to credit reporting, the judgment itself may not hurt you but all that comes before it will.