An outstanding judgment occurs when a creditor wins a court case against you because you have not paid your debt. When you receive notice by mail of an outstanding judgment against you, it can cause worry and stress. If you have an outstanding judgment against you, you may be wondering what to do. In this post, we explain what exactly an outstanding judgment is, how it can affect you financially, and what steps you can take to handle the situation.
A judgment is a court order indicating the official result of a lawsuit. If you are sued over a debt you owe, a court may issue a money judgment specifying that you owe a certain amount of money to a creditor or collection agency. Prior to the lawsuit commencing, you must receive official notice of the lawsuit (“service”). If you ignore this notification, you could lose your chance to dispute your debt, and the court will likely issue a default judgment against you. In addition, the court could order that you pay additional fees such as collections costs, attorney fees and interest. So if the court issues a judgment against you and you haven’t paid it, it is referred to as an outstanding judgement.
Outstanding judgments for money owed can be for any kind of debt you haven’t paid, from credit card debt to delinquent accounts with service providers like utility companies or medical bills. However, this post focuses more on outstanding judgments from debts you owe to lending institutions and credit card companies.
When a creditor wins a lawsuit against you, they have much stronger tools to collect the money you owe. While state laws and individual situations vary, the debt collector may be entitled to utilize the following methods to retrieve their money:
State and federal laws establish limits, exemptions and other protections that apply to debt collection methods. If a creditor is attempting to collect a debt against you, you need to seek the advice of an attorney specializing in debt collections, consult with your local legal bar association, a local legal aid office or contact a JAG office (if you are a service member).
How long creditors have to collect on a judgment varies by state law. Because each state has its own statutes regarding collections, check with your state or local law firm that specializes in debt collection cases to see how long creditors have to collect on outstanding judgments in your state.
Because a judgment is an official court order, only courts can change them. Getting a judgment changed or set aside after the fact can prove very difficult. For that reason, you have a better chance of fighting your debt if you show up in court to defend yourself. In addition, creditors and debt collectors may be willing to negotiate a payment plan with you before the court reaches a decision.
Although court judgments can have serious financial implications, you may feel relieved to know the actual judgment no longer appears on your credit report, but that doesn’t mean it won’t affect your credit score. The original credit account that led to the lawsuit may still be on your report for up to seven years from the date on which you were first late with your payment. This negative information can still impact your credit score although its impact lessens over time. However, judgments don’t become invisible. Since lenders can still search public records, judgments issued against you in collection lawsuits may still impact your ability to qualify for credit. Judgments may also show up on your credit report in error, in which case you may need to request that they be removed.
If you have an outstanding judgment against you, consider your options before you proceed.
Creditors might agree to negotiate with you on your outstanding judgment, if you can’t pay the entire amount of what you owe at one time. You can reach out to the collections agency or creditor and try to negotiate a payment plan so that you pay by installment. If you want to negotiate a settlement, consult with an attorney to determine how best to handle and document your negotiations.
While the best action you can take for your credit is to pay your balances in full before you have a judgment against you, if you do end up being sued by a creditor and have a judgment for debt against you, you may want to pay your judgment in full. If you don’t have the resources to pay in full, find an attorney specializing in collections who can give you legal advice and help you evaluate your options. Failing to pay the judgment in full may result in the court authorizing garnishment of your wages.
Because credit reporting agencies no longer include information about judgments, that information will not appear on your credit report. If you haven’t paid a debt to a creditor and are concerned that you may have a judgment for debt against you, you can call your state court or search your public records. If you do discover a judgment, handling it responsibly can play an important role in helping you get your personal finances back on track.
Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.
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