Definition
A judgment is a court order requiring a borrower to repay a defaulted debt.
Analysis
Some debt collectors may pursue a judgment if they believe that a debtor has the ability to repay a debt but refuses to do so. A judgment is normally only sought when the collectors believes that the expected payout will exceed the legal costs involved in winning a judgment.
A debt collector must first notify a debtor that they are attempting to collect the debt. If they debtor does not dispute the validity of the debt, or if the collector confirms that the debt is valid, the debtor may be sued in court. Generally a debtor must choose a venue local to the debtor’s current residence or where they debtor initially signed the contract.
Once a debt collector files a court case, the debtor will receive a summons instructing them to come to court on a specified date to defend themselves. If the debtor fails to show up, a summary judgment may be rendered, in which the plaintiff may be awarded a decision in the absence of the debtor.
A debtor that receives a summons may still have other options to avoid going to court. Depending on where the debtor lives, the type of debt and other factors, the debtor may have other possibilities. These may sometimes include:
- Pay the entire amount to the plaintiff
- Pay a lump sum settlement for less than the full amount
- Negotiate a payment plan
- Request private mediation
Additionally, a debtor may go to court and contest the debt. The worst thing a debtor facing a judgment can do is nothing. No action can put the debtor in a worse situation.
Depending on the type of debt, the situation of the case and on applicable state laws, a plaintiff that wins a judgment may further pursue garnishment of wages. This could potentially force a debtor’s employer to deduct up to 25% of their net income for payment to the plaintiff.
A judgment is recorded at the courthouse and is available for public inspection. Additionally, it is reported to credit bureaus as a public record on the debtor’s credit report.
