A judgment is a piece of paper issued by the court stating that the creditor (or other plaintiff) has won the lawsuit and is entitled to a certain amount of money. Once the creditor has a judgment against you for a certain amount of money, the creditor can employ a host of methods to collect the money that are unavailable without a judgment.
The judgment must be “entered” -- is, filed with the court clerk -- and this usually happens a day or two after the judge issues it. After it is filed, the court or the creditor’s attorney sends you a copy.
Your creditor will get a judgment against you in any of the following situations:
You can learn about how lawsuits proceed, including how to respond to a complaint, various discovery procedures, summary judgment, and trials, in our Creditor Lawsuits area.
When you get a copy of the judgment, your first step is to understand the amount of money to which the plaintiff is entitled and what each portion represents. Keep in mind that the judge may have knocked off some money in response to a defense or counterclaim you raised.
A judgment usually consists of the following components:
The debt itself. This is the amount of money you borrowed from the creditor, charged on a credit card, or owe on a repossession deficiency balance.
Interest. Part of the judgment will be the interest the creditor is entitled to collect under the loan agreement or contract. If you defaulted on a $1,000 loan at 9% annual interest and the creditor obtains a judgment a year later, the court will award the creditor $90 in “prejudgment” interest ($1,000 x .09 = $90).
Interest can be added from the time the judgment is entered into the court clerk’s record until you pay the judgment in full. Unless the contract sets the interest rate, the postjudgment interest rate is set by your state’s law, generally in the 8% to 12% range.
Court costs. Almost every state awards the winner of a lawsuit the costs incurred in bringing the case, including filing fees, service costs, discovery costs, and jury fees.
Attorneys’ fees. If your original contract with the creditor includes the creditor’s right to collect attorneys’ fees in the event the creditor sues you and wins, these fees will be added to the judgment. They can add up to thousands of dollars. Even without an attorneys’ fees provision in a contract, the creditor may be entitled to attorneys’ fees if a state law allows it.
Depending on the state, a creditor may have from five to as many as 20 years to collect a court judgment. In addition, in most states, the judgment can be renewed for a longer time, and in some states, indefinitely, if it is not collected during the original period, so the creditor may have an unlimited amount of time to collect a judgment.
Sometimes a creditor obtains a judgment against you in a state where you do not live. This can happen if you have moved since the debt was incurred, if you signed a contract in another state, or if the contract specified another state for suing to enforce the contract and you were not able to get the location changed. Or, you may own property or have assets outside the state where the judgment was obtained. The creditor can go into court in the state where you now live or have assets and register the original out-of-state judgment. This means the creditor now has the right to use all the judgment remedies available in the state where you now live or have assets (the second state).
For information about the various ways judgment creditors can enforce a money judgment, see How Creditors Enforce Judgments.
This is an excerpt from Nolo's Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Amy Loftsgordon and Cara O'Neill.