Debt Collection / Judgment / What Happens If You Cannot Pay A Judgment?

What Are Your Options When You Can't Pay a Judgment?

Written by Ascend Team
Updated Nov 13th, 2023
The information provided in this article does not, and is not intended to, constitute legal or financial advice; instead, all information, content, and materials available in this article are for general informational purposes only. 

When you cannot repay a debt, the creditor may file a debt collection lawsuit. If you do not respond to the lawsuit or have no legal grounds to dispute the debt, the court may enter a judgment against you. But what happens when you can't pay a judgment?

A judgment is a court order stating that you are legally liable for the debt and how much money you owe the creditor. The judgment includes attorneys’ fees and costs of filing the lawsuit. Therefore, the judgment amount could be much higher than the original debt. Also, judgments for debt collection may earn interest, so the amount you owe the creditor increases with time.

Getting sued by a creditor is a frightening experience. Now, if you can't pay a judgment, what can you do?

Three Options When You Can't Pay a Judgment

These three ways of dealing with a judgment have significant downsides that you should consider carefully before deciding how to handle a judgment.

Make Payment Arrangements with the Creditor

Some creditors may work with you to set up payment arrangements for the judgment debt. However, they are not legally obligated to work out a payment arrangement. They may also charge processing fees in addition to the amount you owe.

Setting up payments can be risky. The credit could decide at any time that it wants the entire balance paid in full. It may threaten to levy your bank account, seize personal property, or garnish your wages. The actions a judgment creditor may take to enforce a judgment depends on your state laws.

Do Not Dispute a Wage Garnishment Order

Wage garnishments for personal judgments are allowed in many states. However, the creditor must obtain a judgment before asking the court for a wage garnishment order.

You may object to the wage garnishment. Most states limit how much a creditor can receive through wage garnishment based on your income. In addition, you can petition the court to stop the garnishment if it creates an undue hardship.

Furthermore, your employer is now involved in the matter. Most people do not want their employer to know about their financial problems. Therefore, it may be wise to avoid a wage garnishment order if possible.

Borrow Money to Pay Off the Judgment

You may need to borrow money to pay off the judgment to avoid a wage garnishment order and other judgment collection efforts. However, your credit score may be lower because of the judgment. Therefore, finding someone willing to make a loan at a reasonable interest rate and terms might be difficult.

Furthermore, if the circumstances that caused you to default on the original debt have not changed, you probably do not have the money to pay a loan. As a result, you could be trading one debt for another debt, which is never wise.

Consider Filing Chapter 7 to Get Rid of a Judgment

Filing a Chapter 7 bankruptcy case might be the best way to deal with judgment debt. Chapter 7 discharges most judgments for personal debts. Therefore, you could get rid of the judgment and the underlying debt with a Chapter 7 bankruptcy discharge without repaying any of the money you owe the creditor.

You must meet income qualifications to file for bankruptcy under Chapter 7. Our free Chapter 7 Bankruptcy Means Test Calculator estimates whether you are eligible to file Chapter 7.

Filing for bankruptcy relief gets rid of the judgment. However, filing Chapter 7 can also eliminate other unsecured debts, including:

  • Credit cards
  • Medical bills
  • Personal loans
  • Some old tax debt
  • Old rent or lease payments

Child support, alimony, recent personal tax debt, and student loans are generally not discharged through bankruptcy. However, you could exit Chapter 7 debt-free depending on your financial situation.

Resolve the Debt Problem Before the Creditor Files a Lawsuit

If you cannot afford to pay your debts, a bankruptcy filing might be unavoidable. If so, it might be best to file bankruptcy before creditors obtain judgments.

If the creditor receives a wage garnishment order, it may be impossible to get that money back if you put off filing bankruptcy. Likewise, the creditor could levy your bank account or take your personal property. Filing bankruptcy before the court enters the judgment prevents these events from happening. The judgment may be entered as a lien on your real estate too.

Once you file a Chapter 7 petition, the automatic stay prevents your creditors from taking any actions to collect debts without court approval. Filing Chapter 7 end debt collection efforts, including immediately stopping a debt collection lawsuit.

Are You Ready to Get Rid of Debts You Cannot Pay?

Learning about debt relief options is the best way to decide what works best for your situation. Contact us today to discuss Chapter 7, Chapter 13, debt settlement, and debt management options. We can also discuss the benefits of using our Savvy Debt Payoff Planner to get out of debt.

Ascend is ready to help. We provide information regarding bankruptcy and debt relief options. In addition, our team helps you locate a bankruptcy lawyer near you who offers free bankruptcy consultations if that is the route you decide is best for you. If you can't pay a judgment, reach out and we would love to talk your through your options.