When a court awards a creditor a civil judgment after a collection lawsuit, the court does not work to recover the debt for the creditor. New collection options, such as wage garnishment, become available to creditors following the lawsuit, but it remains the creditor’s responsibility – not the court’s – to pursue the debtor and collect the debt after receiving a civil judgment.
Enforcing a Judgment
Creditors can enforce their judgment collection rights only for the period of time the debtor’s state sets for judgment enforcement. Different states have different statutes regarding how long judgments are enforceable. New York, for example, gives creditors 20 years to enforce their judgments through involuntary force, such as garnishing the debtor’s wages or freezing his bank accounts.
A creditor that is not successful enforcing its judgment before the statute of limitations for enforcement expires can renew the judgment with the court. This provides the creditor with a new judgment and the enforcement period begins anew. A creditor whose judgment has expired can still collect the debt but only if the debtor pays voluntarily.
Creditors sometimes sue debtors and win a judgment without knowing whether the individual possesses any assets with which to pay the debt. Should this occur, the creditor can file a post-judgment interrogation request with the court. The court then notifies the debtor that she must appear in court and disclose information about her assets to the creditor. The creditor uses the information it discovers through the post-judgment interrogation when conducting collection activity.
Credit and Incentives
After the lawsuit, the court provides the creditor with a certificate of judgment it must file with the clerk of the court – officially entering the judgment into the pubic record. Because the credit reporting agencies scan court records periodically, the judgment eventually ends up on the debtor’s credit report – reducing his credit score. According to the Fair Credit Reporting Act, a judgment can remain on a consumer’s credit record for the full enforcement period in the debtor’s state. In the event the enforcement period is less than seven years, the judgment must remain for a minimum of seven years.
State laws vary, but generally a consumer may be able to prevent the judgment from appearing on his credit report by paying it off immediately. The court will not enter the judgment into the public record until the creditor files the certificate of judgment. By agreeing not to file the judgment with the court in exchange for payment, a creditor provides a debtor with greater incentive to pay – making collecting the debt easier for the creditor.
Each year that the judgment is legally enforceable the creditor assesses interest charges on the unpaid portion. Judgment interest rates vary by state and by year. The 2011 judgment rate for Utah, for example, is 2.3 percent. Thus, a debt collection judgment continues to grow each year from interest charges until the debtor pays off the judgment or the judgment officially expires and is no longer renewable.