Creditor’s Legal Judgment Credit Nightmare

Creditor's Legal Judgment

Day of Judgment (comics) (Photo credit: Wikipedia)

What is a Creditor’s Legal Judgment?

Recent credit reporting rule changes make it a lot less likely that a creditor’s legal judgment will appear on your credit report.  Stricter verification rules have helped the consumer.  Judgments are hard to verify when challenged.  Their status frequently changes unnoticed by the credit reporting agencies.  If you have one showing challenge it as “unverifiable”.  You are likely to win a deletion from the record just by doing this.

A creditor’s legal judgment for a specific sum of money is a Court document reflecting a debtor’s obligation to pay that sum to a particular creditor.  This can only happen after a debtor has been given notice of the claim in the form of service of a complaint with an opportunity to answer and defend the claim in court. If the debtor fails to respond in a timely way or goes to hearing and loses the Court enters a Creditor’s Legal Judgment reflecting the official outcome of the proceeding. The judgment will have a dollar amount on its face. If you find a judgment regarding a matter for which you were not given notice you should hire an attorney to file a “Motion to Vacate or Set Aside” the judgment.  If the underlying debt is legitimate this motion will probably just start the process over again.  At least this legal maneuver will give you an opportunity to settle the matter without leaving tracks.

Creditor’s Legal Judgment is a Public Document

The creditor’s legal judgment is recorded in the case file.  It is a public record.  As a public record the creditor’s legal judgment is fair game to end up as a negative entry on your credit reportsCredit reporting agencies pay companies such as Lexis/Nexis that scour records such as these to make a complete record of negative information on debtors.  The record of the judgment will remain on your credit report for 7 years from the date it was entered by the court even if it is paid.  Most states  provide that a creditor’s legal judgment is good for at least 10 years and can be renewed at least once.  Interest will continue to run on the creditor’s legal judgment until it is satisfied.

Settle Before Creditor’s Legal Judgment if at all Possible

Being on the receiving end of a creditor’s legal judgment is about as bad as it gets credit wise, short of bankruptcy. A Creditor’s legal judgment is devastating to credit scores.  Even if paid in full the creditor’s legal judgment costs the creditor’s FICO score dearly.  If the creditor’s legal judgment is not paid in full the creditor can go after bank accounts, garnish wages or attach personal and/or real property.  An unpaid legal judgment means a bank won’t even consider a mortgage or other loan until it is satisfied.  The bank would be in second position behind the judgment creditor if it did.  When paying to settle a judgment double check to make sure an entry of “Paid in Full Satisfaction” has been entered.  It will probably take at least 2 months for the credit bureau to receive and enter this notation.  You can speed up that process by forwarding a certified copy of the Court’s notation of judgment satisfaction to the credit reporting agencies.

Blood Doesn’t come from Stones

Many creditor’s are realistically judgment proof.”  This expression describes creditor’s with few assets and not much income.  It isn’t worth the paperwork, time and legal fees for the creditor to drag them into court for the pittance the judge will allow them to collect.  After all, the judge must leave a person enough for necessities such as rent and feeding his family.  In such cases the judgment lingers.  It will go nowhere for a very long time unless bankruptcy is filed.  Bankruptcy does not wipe out child support judgments or DWI damages among a few other things.

When a Creditor’s Legal Judgment is Near…That’s the “Rainy Day”

It is truly imperative to settle before the creditor’s legal judgment is entered.  Borrow from family if you can.  Break into or borrow against that sacred CD and eat the penalty.  Crack the piggy bank.  Get everything about the settlement in writing with the express stipulation that the case will be dismissed “with prejudice.”  Sharp lawyers sometimes bargain for neutral dismissal stipulations that don’t reflect fault on the debtor’s part.  To a stranger it doesn’t have to be clear who won or what the terms of settlement are.  “Case Dismissed” or even “Judgment for Defendant” can be entered on the official record by agreement of counsel.  The creditor won’t care if it appears that you won in most cases as long as they get their money.


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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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