How to Resolve a Judgment

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A court judgment is a very serious legal issue and can negatively impact your finances and credit score. Judgments stem from lawsuits, with a judge ordering the defendant to make full payment for a delinquent debt, or for damages in a civil case. Judgments appear on credit reports for seven years and in public court records. Even more damaging is the potential for bank or wage garnishment. Garnishment freezes bank accounts, allowing debt collectors to take money to satisfy the judgment. Wage garnishment forces an employer to deduct money from the debtor’s paycheck to send to the bill collector. Garnishment is possible after a judge signs a garnishment order. Resolving the judgment ends the threat of garnishment.

Contact the debt collector. Get the name and phone number by reviewing correspondence for the judgment sent to you by the court. Or get a copy of the judgment by visiting the county courthouse. Another option is pulling a copy of your credit report from the Annual Credit Report website. Credit reports are available for free from the site because of provisions in the Fair Credit Reporting Act. Read the credit report to review the judgment listing and contact information for the debt collector.

Negotiate a settlement of the judgment, preferably by making one lump sum payment. This completely resolves the judgment. Get details of the agreement in writing before paying.

Arrange for a payment plan or a settlement in several installments if you cannot pay in a lump sum. Request details in writing, including acknowledgment by the debt collector that your bank account and wages will not be garnished if you make payments as agreed.

Pay by cashier's check and keep copies of all correspondence, including a copy of the check.

Tips & Warnings

  • Settling a judgment for less than the full balance could lead to a higher tax bill. The IRS may treat the savings as income. However, people financially insolvent at the time of the settlement may qualify for an exemption. Contact your tax adviser for details on your specific situation.

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