What is a Debt Judgment?

A debt judgment is when a civil court judges in favor of a creditor or in favor of a debtor. When in favor of a creditor, the court sets an amount to be paid by a debtor to creditor. When a court finds in favor of a debtor, the debt is nullified and the debtor owes nothing.

Significance

Whether a debt judgment is in favor of a creditor or a debtor, the judgment of the court is final. A debtor must pay an amount judged by the court or a creditor must cease collection activities. In most cases, the debt in question is an unsecured debt. A debt judgment represents the final stage of the collection process. This can occur many years after the original debt occurred.

Function

At some point in a debt collection process, the collector determines whether or not it is reasonable to pursue collection through civil court. In many cases, the collector is not the original creditor. Just before a debt reaches the statute of limitations and can not be collected, certain companies will buy the debt from the original creditor for pennies on the dollar. If a debt becomes re-aged, a debtor may be plagued by collection attempts for many more years. At some point, a debt either enters the court system or collection attempts finally stop. A debt judgment ends the debt collection process.

Types

One type of debt judgment is in favor of the debtor. If this occurs, all collection attempts must end. Certain criteria have been met by the debtor and have not been met by the collector in order for the court to find in favor of the debtor. If the court finds in favor of the collector, the debtor is legally obligated to pay the debt according to the terms set by the court. If the debtor fails to pay, then the collector can seek liens or wage garnishment.

Features

If a court rules in favor of a debtor, the collector may not have proved that the debt belonged to the debtor. In many states, the collection party must show original proof of the debt. However, the debtor must know to ask for this proof. The collection agent is not obligated to supply it without a formal request. In other cases, a debt may have passed the statute of limitations, in which case collection efforts are no longer allowed. Statutes of limitations vary according to states and it is not rare fora collector to pursue collection after the statute of limitations passes. If a court rules against a debtor, the creditor has proved that the debt belongs to the debtor or the debtor has failed to appear for the hearing.

Considerations

Once a collection process has reached civil court, it is imperative for a debtor to appear at scheduled hearings. If the debtor fails to appear, the court will find in favor of the collector and debt judgment will be filed. Te debtor must pay the debt plus additional court fees. The only options are to try to settle with the collector or to file for bankruptcy. Although creditors often will not go to the extreme of suing a debtor, it does happen. The worst case can be that a debt cannot be proven by a creditor and a debtor must pay the debt for lack of appearing at the hearing.

Resources

• The Judgment Process and Your Rights
• How to Fight Back Against Debt Collectors