How Does a Creditor or Debt Collector Collect a Judgment Against Me?
Each state allows a creditor a specific amount of time to enforce a judgment; however, some states allow a creditor to renew a judgment a second time or indefinitely. This means that a creditor could hold a debt over your head for a significant period of your life or even the rest of your life. Click here for a table listing state laws.
When a creditor obtains a judgment against you, he has several options to choose from to try and satisfy the judgment:
(1) The creditor will try to attach a lien against any property you own, such as your home. This does not mean you will be thrown out of your home, but rather, that you will not have clear title to your property after the creditor files a lien against it. The interest on the judgment lien will continue to accumulate over time, and if and when you sell your home, the creditor will receive the value of the judgment with interest from the sell of your home before you see any money, provided that the statute of limitations on collecting the judgment hasn't run.
(2) The creditor can locate any monies you have in bank accounts and seize them. Don't think that the creditor can't locate the $5,000 you have in savings at your local bank. There are businesses who specialize in helping creditors and debt collection agencies locate all of your assets, including all of your bank accounts. If the creditor finds any money you have that is not exempt from seizure by your state's laws, he will use his judgment to levy levy your bank account.
(3) A creditor might try to garnish your wages, particularly if you don't own any property or have any money in savings. The federal government and many states have enacted legislation that limits the amount a creditor can garnish from your wages. The only way to avoid the wage garnishment is to resign from your job, find another, and hope that the creditor doesn't locate you again, at least for a year or two. The creditor could force you into becoming a job hopper for the rest of your life in order to stay one step ahead of a wage garnishment.
How to Deal with Debt Collectors
Federal and State Laws Regarding Debt Collection
State Statutes on Enforcing a Judgment
The reasons above are why you should negotiate with creditors for a reduced settlement or an affordable repayment plan before the creditor sues you. If he does sue you, he will do so for the amount you owe, plus attorney and collection fees that could tack on thousands more in addition to what you originally owed. You will have to pay the judgment or file bankruptcy to have the judgment voided. This is unnecessary when you can settle your debt for about 25% of what you owe by threatening to file Chapter 7 bankruptcy. The table on the next page shows the number of years a judgment is valid in every state, the maximum interest rate a creditor can seek, and if the judgment can be renewed. The information below is not guaranteed to be accurate. Its purpose is to illustrate to you why you should work out an agreement with the creditor before you are sued so you don't have a judgment hanging over your head.