March 31, 2015
A creditor filed a judgment against you but you weren’t notified—now it’s ruining your credit. What can you do?
Sometimes, the first time you find out you’ve had a judgment entered against you is when the judgment-holder seeks to enforce it. While due process is supposed to notify all parties to a court action ahead of time, there are many reasons why you may not have gotten that notice. You may have moved from the address where notice was delivered and it did not follow you to your new address. Or someone might have received your notice and simply tossed it away. Or you got the notice, but did not fully understand what it meant.
Looking at your credit report regularly is one way to see if there are any judgments against you. Judgments are listed in the public record section of the credit report. However, credit reports are not always completely accurate or up to date.
If there is any doubt in your mind, you should contact the court where you think the judgment might have been entered. Many courts have online access where you can check your name without leaving your seat. Others require an in-person visit to view the public record of judgments. Here’s a list of the various courts and what can be done to access them. And here’s what you need to know about dealing with a judgment.
When You Didn’t Know About the Lawsuit or Judgment
There are various scenarios that allow you to ask a court to reopen a judgment — for example, if you weren’t notified or served the original papers. However, as the judgment in the case gets older, the likelihood of succeeding under that argument goes down dramatically. The rules and time periods vary greatly from state to state. This is one of those times when it is best to consult with a qualified lawyer who knows the court rule and laws on the subject.
When the Judgment Is From Another State or a Federal Court
Federal court judgments are enforceable in every state, as the jurisdiction of a federal court is national. However, because the required amounts of a federal lawsuit are so much larger, you probably have a greater problem than just the entry of a judgment. You would know if you are being sued in federal court.
State court judgments, however, do not have power beyond that state’s borders. In order to enforce an out-of-state judgment against you in your home state, the judgment has to be domesticated, or registered in the courts of your home state. The requirements for that can vary from state to state and the process for the creditor can be quite expensive and time-consuming. It is not common for out-of-state judgments to be enforced in another state because the processcan be daunting and expensive. But the record of that judgment will likely appear on your credit report.
Can a Judgment Be Enforced If You’ve Been Paying?
Many judgments will contain an order of payments. The court’s rules or state statutes may require that you be allowed to pay the judgment in installments. But an installment order does not carry a requirement that you receive a periodic statement like a credit card or loan. Some installment payment orders may require weekly, not monthly, payments. There is usually no grace period on the due dates for payment and no provision for changing the payment terms unless the court orders it. So if you are a day late in making your payment, or even a penny short in paying the full amount required, the judgment creditor may be entitled to ask the court for an order enforcing the judgment. This can mean a wage garnishment, a bank account attachment or a lien on your house.
Even though you may have been making payments on the account to the original creditor, it does not mean that you have been making the payment in the proper amount or paying on time. Or you may have been sending money to the wrong party. The account may have been sold or transferred and the place where you are sending money is the wrong place, which can be money thrown out of the window. Always make sure you know who you are paying, pay the required amount and pay on time. Your contract may require that you pay off the entire balance you owe at once if you default in your payment terms in place, amount or time.
Judgments Can Be Altered
Even if the judgment is final and cannot be reopened, it does not mean that the terms of the judgment cannot be changed. For instance, if the judgment does not allow installment payments, terms for installment payments may be added. Or if the payments are beyond your ability to pay, then they may be lowered to fit your income. Be aware however, since judgments typically allow for interest on the debt to continue running at some rate, too small a payment may be just throwing money away since it never covers the accruing interest. If you have insufficient income or assets to pay a judgment, then you may want to explore bankruptcy as an option. With certain limited exceptions, judgments can be discharged in bankruptcy.
Judgments Can Be Sold
Much like any other account receivable, a judgment can be sold by a creditor to another entity. When judgments are sold, the transfer must be recorded on the court docket or it is not valid. Before you make payments on a judgment, make sure that the payments are going to the right person. That is why it is so important to obtain from the court file the name and address of the judgment creditor. If you pay the wrong person, you won’t get credit for those payments.
Document Your Payments On the Judgment
It is vitally important to keep good records of every payment you make on the judgment. Accounting errors occur and you want to make sure that you get credit for every payment you make. Since interest may still be running on the debt and there will be additional amounts added to your balance for court costs and attorney fees, you must keep track of the balances and the payments. It’s not a bad idea to periodically contact the holder of the judgment to determine your balance if you are paying on it to make sure your numbers jibe with theirs.
Don’t Ignore a Judgment Once You’re Aware of It
Judgments do not have a short lifespan. A judgment in Connecticut, for example, is good for 20 years, and it does not end there. Before the judgment expires, it can be renewed for another 20 years. For many people, 40 years is the length of an adult working life. Again, the duration of a judgment varies greatly from state to state, so consult with an attorney and do not ignore it. While a judgment might stay on your credit report for seven years, it may remain effective long beyond that date. Like zombie debt, a judgment may come back to life when you least expect it.
When You Pay the Judgment in Full, Get a Release
Unless you are making your payments directly to the court, the judge has no way of knowing that you have paid the judgment off. When a judgment is paid in full, the person holding the judgment should file a satisfaction of judgment with the court to show that it is paid in full. When making your final payment, not only should you document that it is your final payment, but you should request a copy of that satisfaction of judgment document and make sure that a copy is filed with the court. Do not assume that anyone else will take this step.
Similarly, if a lien has been filed on any property to secure the judgment payments, you will want an original of a release of judgment so that you can be sure that it is filed with the appropriate authorities. Some states require a filing in the land records in your town or county clerk’s office or with the Secretary of State where the property is located. Again, without proper documentation, the records offices will have no knowledge that the judgment is paid. Although bankruptcy can discharge most judgments, you must take additional steps to get a release of the lien in a bankruptcy case so the record is clear that there is no further claim against your property.
When the judgment is paid in full, be sure to get a fresh copy of your credit report to determine that it is being reported on your credit report as paid. Nothing will hurt your creditworthiness more than to have a credit report showing that you have a judgment against you that remains unpaid.