To receive a judgment for a debt you owe, the creditor must file and win a lawsuit against you. If you did not respond to the lawsuit, a default judgment is granted to the creditor, who then sends you the paperwork. To get rid of the judgment, you usually have three options: vacate it, pay it or file bankruptcy.
Step 1: Get Legal Advice
The Consumer Financial Protection Bureau suggests contacting an attorney if you don't know what to do about the judgment. You might be able to obtain free legal counsel from a legal aid office or clinic in your area.
The creditor can execute the judgment to the extent allowed by state law. A common method of recovery is to garnish your wages, bank account or personal property. The creditor may also be able to attach a lien to your real estate in order to secure the debt.
Step 2: Vacate the Judgment
File a motion to vacate with the court to have the judgment canceled or dismissed if you did not appear at the trial and want to prove your case. According to the Washington Law Help website, if you have good reason for filing the motion -- like if you were not properly served with notice of the lawsuit -- your motion may be granted.
Procedures for filing a motion to vacate vary by state, but you usually must:
- Contact the court that issued the judgment for the appropriate documents
- Complete the paperwork
- Obtain the judge's signature so the case can be put back on the court's calendar
- File the paperwork with the court by the required date
- Serve the creditor or its attorney with papers of the motion
- Show up for the hearing
You must be able to explain why you did not appear in court and provide proof of your defenses. If you disagree with the judgment amount, you might need to file a motion to vacate the judgment plus a separate form for correcting or canceling the judgment amount.
Bankruptcy expert Leon Bayer states on the Nolo website that vacating the judgment may not be a good tactic because it does not mean you do not owe the money. It is simply a way for you to fight the case. If you owe the money, you could end up with additional costs, such as legal fees.
Step 3: Pay the Judgment
Follow the instructions on the judgment papers for satisfying the judgment. If you would rather not deal with the creditor, contact the courthouse to see if you can make the payment to the court.
If you cannot pay the debt in full, contact the creditor to set up an installment agreement. If the creditor does not agree to a payment plan, see if the court can help you establish one.
Negotiate a settlement with the creditor or its attorney. Leon Bayer suggests asking the creditor to vacate, or dismiss, the judgment as well. You might have to increase your settlement offer to get the creditor to settle plus vacate the judgment.
You can contact an attorney to have the judgment discharged through Chapter 7 bankruptcy. Just be advised that this will stay on your credit record for 10 years. According to the website of Ronald S. Cook, a bankruptcy attorney in New York, the debt might not be dischargeable if it is owed to the government or the creditor files an objection to the discharge.
Step 4: Protect Your Assets
File an exemption claim with the court if you have funds or property that are excluded from garnishment under federal or state law. For example, exemptions from garnishment under federal and Virginia law include:
- Veterans benefits
- Unemployment compensation
- Social Security disability benefits
- Public assistance
- Child support payments
- Workers' compensation benefits
The state may have exemption programs for protecting your home, vehicle and other personal property from seizure, though stipulations may apply. For example, according to the Florida Bar website, a debtor in Florida can claim the homestead exemption if the creditor does not already have a lien or mortgage attached to it.
Government entities such as the Internal Revenue Service, United States Department of Education and state revenue agencies do not need judgments to levy or garnish. The agency notifies you of its intent to levy your property beforehand. Instructions for responding to the levy -- such as requesting a hearing or establishing a payment plan -- are included in the levy notice.