Part 1 — Debt Collection Judgment Basics

what is a judgment?

A debt collection judgment is a court order that you owe the creditor money. The judgment is the final decision in a collection lawsuit. Most judgments are entered by default after the defendant fails to properly respond. This is why it's so important to answer the summons and complaint.

What can the creditor do with a judgment?

Once a creditor has a judgment, it has the ability to garnish both your bank account and paycheck. It also creates an automatic lien against any real estate that you own, which you’ll have to pay off if you want to sell or re-finance. And in some cases, creditors will seize some of your personal property and have it sold to pay the debt.

how does a creditor find my bank or employer for garnishment?

A judgment creditor may issue a Demand for Disclosure, which requires you to disclose all of your assets. There are signficant penalties—including an arrest warrant—for not complying.

Judgment creditors may also call you in for an interview—called a deposition—and ask you questions about your assets.

how long does a judgment last?

Judgments last for ten years and then can be renewed for another ten years. There is no limit to how many times a judgment can be renewed as long as the creditor takes the appropriate steps every ten years. So a judgment against you will potentially last forever.

does a judgment accrue interest?

Judgments currently accrue interest a 4% annually under Minnesota law. This might actually be a relief if your debt was accruing a higher interest rate before the judgment.

WILL IT BE ON MY CREDIT REPORT?

The major credit bureaus—Equifax, Experian, and TransUnion—do not currently report judgment information. However, other credit reporting agencies, such as LexisNexis, do report judgments, so your ability to get credit, housing, and employment might be affected.

Part 2 — Dealing with a Collection Judgment

option #1 — If you can afford it, negotiate a settlement

For many people, the best choice is to negotiate a settlement of the debt collection judgment. Settling the judgment allows you to avoid the stress and inconvenience of garnishments and liens.

It’s important to understand that great deals are hard to come by after judgment because you've lost most of your leverage. But if you can demonstrate a significant financial hardship, or have a lump sum of cash available, you may be able to get the creditor to knock a decent chunk of the balance off.

It’s also important to be realistic: if the judgment is for a lot of money, or if you have several judgments, can you really afford to settle?

option #2 — if you meet the necessary criteria, vacate the judgment

If the judgment was obtained by default, you may be able to get it vacated or undone. Vacating the judgment doesn’t make the debt go away, it just sends the case back to the beginning and gives you a chance to defend yourself.

In our experience, vacating a judgment is a long-shot option for most people for three reasons:

• First, you must provide strong evidence that you never received the creditor’s lawsuit or that you had a good reason for not responding. Just telling the judge “I never got it” or “I didn’t know I needed to respond” isn’t going to cut it. 

• Second, you have to show the court that you have a valid defense to the debt. 

• Third, in most cases you have to vacate the judgment within one year of its entry. 

Because of these challenges, the vast majority of people would be better off choosing one of the other three options to deal with the judgment.

option # 3: If all else fails, bankruptcy may be your best option

If you can’t afford to settle and aren’t able to get the judgment vacated, your best choice is probably bankruptcy. Bankruptcy puts an immediate stop to garnishments and other collection activity. It allows you to remove judgment liens from your property. And it wipes out any other debts lurking out there.

Ready to talk to a lawyer about a judgment?
Schedule a consult with debt defense lawyer Todd Murray.

Since 2009, Todd has helped hundreds of Minnesotans deal with lawsuits, judgments, and garnishments. His work has saved his clients millions of dollars and many sleepless nights. Clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.