Collecting Your Judgment - The Complete Guide for 2023

January 4, 2023

What is a judgment?

A judgment is a court-ordered decision requiring a person, business, or other entity to pay a debt or money owed to another party. Judgment collection refers to collecting the debt ordered by the court system. It can involve many methods, such as garnishing wages and seizing the judgment debtor's assets.

Several law books in a bookcase.
Judgment debtor assets are just one of the many ways to help apply pressure for collection.

How to collect a judgment

Collecting your judgment typically involves tracking down the judgment debtor and taking legal action to retrieve what is owed. Depending on the situation, this can include garnishing wages, seizing motor vehicles, and seizing the debtor's property to pay off the debt.

Judgment collection also includes analyzing state laws regarding interest calculations and payment plans, as well as filing papers such as liens on assets to secure the debt. It’s essential to understand your options before collecting on a money judgment to protect yourself from any liability or risk associated with doing so.

Strategies for collecting a judgment

Collection efforts on a court judgment are many; one of the most common strategies is garnishing the debtor's wages. This requires filing papers with their employer and having a portion of their wages automatically withheld and sent to you to repay the debt.

Another strategy is to place liens on the debtor's personal property to secure repayment through the county recorder's office. This helps ensure that if they sell any assets, you will receive some money towards your judgment.

Judgment collection sometimes involves negotiating a payment plan or interest rate reduction with the debtor. It can also involve suing them directly or even taking them to small claims court again if necessary.

Enforcing a judgment through wage garnishment

When attempting to collect on a judgment, one of the most common strategies is to garnish wages from the judgment debtor. This requires filing a court order with their employer and having a portion of their wages automatically withheld and sent to you to repay the debt.

The amount that can be garnished typically depends on state law, as well as exemptions that may apply. It is essential to review local laws and regulations to ensure compliance with wage garnishment rules. Additionally, some debtors may have multiple employers, meaning you must notify each employer and file paperwork accordingly.

Selling the judgment to a third party

Selling a judgment to a third party is an option for those looking to collect on their unpaid debt. The process typically involves entering into a contract with a third party who agrees to pay the debtor fair market value in exchange for the rights to pursue the creditor and collect the debt.

This can be beneficial for judgment creditors as it takes away much of the responsibility and hassle involved with collecting payments from a debtor themselves. Additionally, there may be some monetary benefit, as judgments sold to third parties are often purchased at a discount from the amount owed.

It is essential to ensure that any contract regarding selling your judgment meets all legal requirements for it to be enforceable.

Hiring a collection agency

When attempting to collect on a judgment, it may be necessary to hire a collection agency.

Collection agencies are specialists in finding debtors and collecting payments from them. However, their successful rate is around 3% because they only make a phone call and send a demand letter.

The role of a judgment creditor

A judgment creditor is an individual or entity who has won a court case against a defendant, resulting in a legal judgment being issued. As the judgment creditor, they now have the right to collect on the debt that has been declared. To do this, they may choose to take specific collection actions such as garnishing wages or filing a real estate lien against the property the debtor owns.

The judgments creditor also may be able to obtain additional information about the debtor's finances, bank accounts, investment accounts, real estate, assets, and resources to help them achieve the satisfaction of judgment. Additionally, if necessary, the judgment creditor can pursue further legal action against the debtor to ensure that their court-ordered payment is received.

The role of a judgment debtor

A judgment debtor is an individual or entity ordered by a court to pay the judgment to someone else due to having lost a legal case. As the judgment debtor, they are responsible for paying the amount determined by the court ruling.

In some cases, the debt may remain unpaid if the debtor does not have the financial means to make payment. In such situations, extra measures such as a writ of garnishment or other collection strategies may be taken to satisfy the debt.

Judgment debtors should know their rights and options regarding repaying judgments to protect themselves from further legal issues or unnecessary financial burdens.

Statute of limitations on collecting a judgment

The statute of limitations is a time limit imposed by law that restricts the amount of time one has to collect on a judgment. This period usually begins when a judgment becomes final and varies depending on the state and type of debt that was assessed.

Generally, creditors have anywhere from three to 20 years to try to enforce the court order and collect payment from the debtor before the statute of limitations runs out. Once this happens, the debt may no longer be legally collected or enforced. Both debtors and creditors need to be aware of their rights related to statutes of limitations for debts to be handled ethically and responsibly.

A statue of Lady Justice holding scales in her right hand.
Often times debtors feel they have all the power, though that is not the case.

The effect of a judgment on credit score

A judgment can significantly negatively impact a credit score because it indicates that a person has not fulfilled their financial obligations to creditors. Judgments are entered after attempts of collection activities by creditors fail. They can remain on an individual’s credit report for seven years, negatively affecting their ability to obtain future loans or lines of credit.

The severity of the impact will depend on the size of the debt, how much time has elapsed since the debt was incurred, and other factors related to the debtor’s financial history. Additionally, bad marks will continue to appear on a credit report until all debts related to the judgment have been resolved.

The role of the courts in judgment collection

Courts can play an essential role in the collection of judgments. Generally, the court is involved when creditors obtain a favorable ruling against a judgment debtor for repayment of an unpaid debt. The court issues an order that directs the debtor to pay the amount owed. If the debtor fails to do so, the court may allow creditors to pursue various collection activities, such as garnishing wages or seizure of the debtor's real estate to satisfy any outstanding debt. In addition, courts can provide remedies such as contempt actions or modifications of existing payment plans if needed.

A view of pillars on a courthouse.
Courts play an essential role in judgment collection efforts.

Small claims court judgments

Small claims courts can play an essential role in the collection of judgments. Small claims courts are designed to provide a way for individuals to resolve minor disputes without going through the expensive and lengthy process of hiring lawyers or using other, more formal dispute resolution methods.

When it comes to collecting judgments, small claims courts can enforce court orders by providing remedies such as wage garnishments or liens against property owned by the debtor. Additionally, small claims courts can modify payment plans if needed so that creditors and debtors can reach a mutually beneficial agreement.

Mediation and arbitration for judgment collection

Mediation and arbitration are two methods for judgment collection.

Mediation is a process in which a neutral third party (the mediator) assists the parties involved in reaching an agreement on the dispute. The mediator does not make binding decisions, and the parties maintain control of the outcome.

Arbitration involves hiring an arbitrator, who makes a binding decision based on the evidence presented by both sides. This decision is legally binding but usually does not require court appearances or other legal proceedings.

Both mediation and arbitration are cost-effective alternatives to litigation, as they can often resolve disputes quickly and without lengthy court battles.

A view of the courthouse in Pasadena, California.
Pasadena Superior Court in Pasadena, CA

Tips for successful judgment collection

Here are some tips for successful judgment collection:

  • Understand the rules and laws governing debt collection in your state and familiarize yourself with the legal process.
  • Research and verify the debtor’s financial assets before initiating a judgment to ensure that you can recover your money.
  • Use private investigators to locate debtors who have moved out of state or taken other steps to avoid judgment collection.
  • Consider alternative dispute resolution options such as mediation or arbitration, which can expedite the process without taking it to court.
  • Follow up regularly on any outstanding judgments, as interest may accumulate over time and increase the likelihood of successful recovery.
  • Utilize professional collections agencies, if necessary, who specialize in collecting overdue debts from difficult debtors.
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