Debts come in all shapes and sizes. As a consumer, your debts probably include the mortgage on your house, the loan on your car, and all the money you owe on your credit cards. It is unlikely that you have an outstanding judgment against you. But if you do, you probably also know that the judgment is unique compared to the rest of your debts.
The internet is full of information discussing judgments, how to collect them, and even how to avoid paying them. But not a lot of content gets down to the details of what makes judgments different. This post will. Below are three ways judgments differ from ordinary debts.
1. They Are the Result of Court Proceedings
Ordinary debts – like mortgages and car loans – are active the minute the lender transfers money to the borrower. As soon as the bank pays the car dealership for your new ride, you have an outstanding debt you are legally obligated to pay. By contrast, judgments do not exist until court proceedings establish them.
Technically, a judgment is a type of court proceeding. It is a proceeding in which the court recognizes the legal validity of a debt and orders the debtor to pay it. Creditors cannot collect until the judgment is entered because there is no legal basis to collect until that time.
2. They Are Transferable Assets
Because judgments are the result of court proceedings rather than transactions between parties, the law also views them as transferable assets. Let’s say you were sued by a company for not paying your bill and you lost. A judgment is entered against you for the amount of the original bill plus the company’s court costs and interest.
Legally speaking, the judgment is a transferable asset treated no differently than securities, real property, etc. The company that sued you could sell the judgment to a collection agency. The collection agency would become the legal owner of the debt and have all legal rights to collect on it.
3. They Are Collected More Aggressively
The third significant difference is that judgments are often collected using more aggressive means. When it comes to ordinary debts, collection agencies are limited in what they can do. They can only contact you in certain ways. They can only contact you at certain times. Except in rare circumstances, they cannot touch your assets.
Collecting on judgments is still restricted, but creditors have many more tools at their disposal. Judgment Collectors, a Utah judgement collection agency, says the states offer a variety of collection tools unavailable to general debt collectors. In most states, creditors have access to:
- wage garnishment
- bank account and investment garnishment
- judgment liens on real property
- asset seizure and sale
- skip tracing tools for tracking down deadbeats.
The majority of outstanding judgments in the U.S. are never collected. That is probably because most creditors don’t know about all the tools available to them. And even when they do, they don’t have the knowledge or experience to use them to their full potential.
Collection Efforts Can Continue for Years
Imagine a debtor facing a bill worth tens of thousands of dollars after losing a civil lawsuit. What he may not know is that a legal judgment gives the creditor authority to collect for a long, long time. Thanks to generous statutes of limitation, collection efforts can continue for years. Most states allow enforcement for 7 to 10 years with unlimited renewals, as necessary.
Needless to say, judgments and ordinary debts differ in many ways. If you ever have a judgment entered against you, just pay it.