Getting served with a default judgment may be alarming. But knowing what happens next will help you gauge your options and decide how to handle it best. Because every case is unique, keep in mind that it is best to speak with an attorney to get specific advice for your situation.
A default judgment can be issued when one party doesn't show up to court or respond to a lawsuit. The creditor may get a judgment against you, giving them the ability to start wage garnishment or bank account seizure. Understanding what goes into enforcing a default judgment is vital if you're facing one. You need to know your rights and what steps you can take to protect yourself.
When you don't pay your debt, the creditor may take you to court. You will then be served a summons and complaint where you can read where and when you will need to go for a hearing. You may be given twenty days, which may vary in some states, to file your response with the court. Otherwise, the plaintiff could request a default judgment in their favor. The court may then issue a judgment against you. This judgment gives the creditor several ways to collect on the debt.
A default judgment is a legal ruling that you owe a debt. When it’s enforced, it can have a significant impact on your finances. This is because the judgment allows the lender to collect the full amount of the loan, plus interest and fees, from your wages or assets. One way is through wage garnishment. It’s when your employer withholds a portion of your debt and sends that amount to the creditor until the debt is paid off.
Default judgments can also damage your credit score, making it difficult to get approved for new loans or lines of credit. In addition, default judgments can stay on your credit report for up to seven years, making it hard to improve your financial situation.
A default judgment can be difficult to overturn, but it is not impossible. There are several steps you can take to try to get the default judgment set aside.
First, you will need to locate the court order entering the default judgment. This should be relatively easy to do, as the court should have sent you a copy of the order when it was entered. Once you have located the order, you will need to file a motion with the court asking that the default judgment be set aside. In your motion, you will need to provide a reason why the default judgment should be set aside. For example, if you were never served with notice of the lawsuit, you will need to explain this to the court.
Once you have filed your motion, the court will set a hearing date. At the hearing, both you and your creditor will have an opportunity to present your arguments to the judge. The judge will then make a decision on whether or not to set aside the default judgment. If the judge sets aside the default judgment, this does not mean that you do not owe the debt. It simply means that your creditor will have to start over from scratch and file another lawsuit against you if they want to collect on the debt.
A judge can nullify the default judgment on your debt based on different reasons. Typically, valid reasons may be:
If any of these reasons is true in your case, you may ask the judge to set aside a default judgment on your debt.
If the default judgment can’t be nullified, you will have to pay your creditor the amount that has been specified in the judgment. If not, your creditor will request the judge for an execution so that they can take your property as a form of payment. They may also want to garnish your wage. However, there are certain exemptions as to what they can touch. Depending on your state’s exemption laws, your home, other property, and a good portion of your income may be protected from collection. It is important to know your state’s exemption laws to see whether or not your property would be safe from creditors.
Giving up your home or a portion of your income to creditors can be devastating. If you were unable to pay your creditors, chances are you were already hard up for money to begin with. So, losing your home or a chunk of your income could only make things worse for you. Fortunately, there are still some options you can pursue after getting a judgment.
Negotiate with your judgment creditors
Even after a judgment, creditors are usually still willing to negotiate because they would rather receive partial payment than none at all. However, you should make sure that you agree to a payment plan that you know you can afford to pay. Otherwise, you may fail to pay the agreed amount and potentially violate the court order.
So, to negotiate with your creditors, make sure you assess your financial situation first and come up with a realistic plan for repayment. If you can offer a lump sum payment, you may be able to negotiate a lower overall debt amount. If not, try to come up with a realistic monthly payment that you can commit to.
Be prepared to negotiate on terms such as interest rates and late fees. Once you have reached an agreement, make sure to get the terms in writing before making any payments. By taking the time to negotiate with your creditors, you can find a resolution that works for both parties.
Another option is to file for bankruptcy. This can give you a fresh start by eliminating your debt obligations. Furthermore, filing for bankruptcy will put an automatic stay on any collection activity, which will give you time to negotiate with your creditors. If you qualify for chapter 7, you may be able to wipe out your debts. However, creditors can still take and liquidate your assets unless they are protected by your state’s bankruptcy exemption laws.
Therefore, it is important to understand the pros and cons of bankruptcy before pursuing this option.
First and foremost, bankruptcy can be very costly, both in terms of the fees charged by attorneys and the court system, and in terms of impact on your credit score. Additionally, bankruptcy will remain on your public record for up to 10 years, making it difficult to obtain new lines of credit or secure employment. Finally, depending on the type of bankruptcy filed, you may be required to liquidate some of your assets in order to repay creditors. Although bankruptcy can offer relief from crushing debt, it is important to understand all of the potential consequences before moving forward. Use our free Chapter 7 vs Chapter 13 Bankruptcy calculator below to see if that is an option you may want to pursue.
If your wage is exempted from garnishment, your creditor won’t be able to touch it. The same thing is true to your property. As long as your home and other properties do not exceed your state’s exemption amount for these properties, your creditors cannot take nor liquidate them. Once the statute of limitations expires, the debt is considered "time-barred" and can no longer be collected.
While none of these options are guaranteed to work, they may provide you with some relief from a default judgment.
One thing you should always do in a lawsuit is take action to prevent a default judgment. A default judgment is a court order that says you owe the debt and the creditor can collect it from you. If you do not take steps to prevent a default judgment, the creditor may be able to garnish your wages or take other actions to collect the debt.
There are several steps you can take to prevent a default judgment. First, you should file an answer to the lawsuit. This tells the court that you are contesting the lawsuit and gives you a chance to present your side of the story. Second, you should make sure that you attend all court hearings. If you do not show up for a hearing, the court may issue a default judgment against you. Finally, you should keep track of all deadlines in the case. Missing a deadline could also result in a default judgment.
By taking these steps, you can help prevent a default judgment against you in a debt collection lawsuit.
If you're facing a default judgment, it's important to seek professional help to understand all of your options and create a plan to improve your financial health.
