Civil Court Judgment Debt—What It Is and What It Means
Civil court judgment debt is debt that a court has ruled that you owe. The creditor has sued you and the judge has ruled in the creditor’s favor. If you do not respond to the lawsuit, the creditor wins by default, which is the same as the judge ruling for the creditor. Once the judge has ruled that you owe a certain amount, this amount is the judgment debt.
Even if a debt was originally a low priority debt, it becomes high priority once a judge rules that you owe a certain amount. Once a debt becomes judgment debt, it can quickly lead to loss of wages, benefits, bank accounts, personal property, and even your home. In extreme cases, it can even result in your incarceration. You have rights to limit these consequences, but to do so, you must understand these rights and raise them aggressively when a creditor tries to take these steps.
Although you should have received notice of a lawsuit against you and notice of any ruling from the court that you owe a debt, surprisingly often consumers never know that a judgment was entered against them. The first they learn about the court ruling is when their wages are garnished, their bank accounts frozen, or their property seized. Always pay close attention to any legal documents sent to you so that you can head off the worst. Chapter 4 has tips to defend a lawsuit against you.
On the other hand, a creditor cannot seize your wages, bank account, or property unless and until it brings a lawsuit and a court enters a judgment against you. There are two exceptions to this.
- 1. Secured creditors, such as your auto or mortgage lender, can seize their collateral if you get behind on your payments to them. See Chapters 14 and 18.
- 2. The government can garnish your wages and seize tax refunds to repay student loans or other debt owed to the government. See Chapter 13.
But for credit card, medical, and other unsecured debt owed to private creditors, your wages, bank account, and property are not at risk until a court issues a judgment against you.
Even if a court does enter judgment against you, there are still legal limits on how much or if any of your wages, government benefits, and money in your bank account can be seized. There are also limits on whether property can be sold to pay off your debts. For many people, these limits mean that there is nothing that a creditor or court can do to make you pay a court judgment. This is called being “judgment-proof” or “collection-proof.”
To be collection-proof, your income must be low enough that it is fully protected from garnishment, all of the money in your bank account (if you have one) must consist of government benefits or otherwise be protected from seizure, and your personal property and home must all be exempt from seizure. In that case, you do not have to worry about the judgment debt until your financial situation substantially improves. When your financial situation does improve, however, the creditor may be able to collect on its debt at that point.
If you are not collection-proof, then you must pay careful attention to the implications of a court judgment against you. This chapter outlines how to protect your wages and property from seizure to pay your court judgment debt and other steps you should take when your wages and property are at risk.