Imagine checking your credit report and seeing a red flag labeled “judgment.” Your heart sinks. What does it mean? How did it get there? And more importantly, how will it affect your life?
A money judgment is like a financial scarlet letter. It’s a court order declaring that you owe a specific amount to a creditor. Judgments can stem from unpaid credit card bills, medical debts, personal loans, or even a lawsuit you lost. Once a judgment is entered against you, it can wreak havoc on your finances, credit, and even your peace of mind.
In this blog post, we’ll explore the ins and outs of money judgments, how they can impact your life, and what steps you can take to protect yourself.
What Does a Money Judgment Mean?
- Creditors get judgments when they file a lawsuit and win. The judgment is entered for a certain amount of money.
- Default Judgments: When sued, if you do not file an Appearance or show up to court, the creditor will get a default judgment.
- Vacating Default Judgments: There is a small window of time to ask the court to vacate the judgment. Then you start from scratch.
- Appealing Judgments: You must assert an error in law. This is seldom practical.
How Creditors Collect on a Judgment
- Judgment Creditors have the aid of law enforcement to collect. Once they obtain a judgment, they can garnish your bank account and wages. Creditors can also drag you into court and make you testify about your property, bank accounts, where you work, and other information.
- Interest on the amount you owe. In Illinois, they add nine (9%) percent each year. After several years, I have seen a $5,000 judgment grow to $10,000.
The Impact of a Judgment on Your Life
- Credit Reports: Each of the credit bureaus will show the judgment. This will significantly reduce your credit score, potentially affecting your financial opportunities in the future. How much is the reduction? 100 points for more.
- Judgment Liens: Most professional collection record judgments. It is like a mortgage. If you are a homeowner, you must pay the creditor when selling your home or refinancing. Likewise, if you are buying a home, the judgment will pop up, and you must obtain a release of the lien.
- Longevity of Judgments and Judgment Liens: A judgment is valid for seven (7) years but can be renewed for a total of 27 years.
Bankruptcy and Judgments
- Bankruptcy discharges debt. It does not automatically remove a judgment lien. Separate action must be taken: a Motion to avoid the judgment to the extent it impairs Illinois exemptions.
- Judgment liens are valid in the county where you live. If you move to another county, the lien is not valid. However, creditors can register their lien in the new county. That assumes they keep track of you.
Facing a money judgment can be overwhelming, but understanding your options is crucial. Consult with an attorney to explore potential solutions. Remember, you don’t have to face this alone. Seek help and protect your financial future.
Remember: It is crucial to consult with a qualified attorney if you are facing a judgment or considering bankruptcy. Our law firm, ROBERT J ADAMS & ASSOCIATES, also known as The Bill Slayer, provides personalized legal advice based on your specific situation and helps you navigate the complexities of the legal system.