Some debt collectors choose to sue to recover the funds that are owed to them. When a lawsuit is resolved in favor of the debt collector, the court will issue a judgment--in essence, a legal determination that the debt is valid. Judgments are usually the last step in the process before aggressive debt collectors use the law to recover owed monies.
Effects of Judgment
When a judgment is entered, it becomes part of the public record and usually attaches to your credit report for up to seven years. Once added to your credit report, it can significantly affect your credit score and even prevent you from obtaining employment in some industries or from obtaining a security clearance from the federal government. Many landlords will not lease to people who have outstanding landlord-tenant judgments on their credit reports.
A creditor with a judgment is allowed to attach a lien to your assets, so that the lawful transfer of a title, such as a house or automobile, is prohibited until the debt is resolved and the lien is discharged. This lien is attached by court order and generally cannot be fought or negotiated with the creditor.
A judge may order a garnishment of wages or tax-refund payments on certain debts. Each state has different standards about how much money may be garnished from a person's paycheck, but in general, once a judgment is entered, the creditor has the right to ask the judge for an order of garnishment, which an employer must honor.
In certain circumstances, a judge may authorize the local sheriff to seize your assets to pay back a debt judgment. These assets may range from bank accounts to vehicles or expensive goods, including watches or jewelry. Usually, before an asset seizure, the creditor will ask the judge to issue a subpoena asking you to show up in court with a list of assets.
Certain people are relatively immune to the execution of a judgment--typically the unemployed and those with no assets. Although the judgment remains on the books, the court will recognize that the person in question has no assets or resources and so no action to satisfy the debt will be authorized. This usually requires the debtor to prove his lack of resources.
Jason Gillikin is a copy editor and writer who specializes in health care, finance and consumer technology. His various degrees in the liberal arts have helped him craft narratives within corporate white papers, novellas and even encyclopedias.