Managing Debt

Help! I Found a Judgment on My Credit Report

Comments 18 Comments

It’s scary enough to owe money you can’t pay back, but what may be even worse is finding out that you have already been sued for a debt, but didn’t even know it. Mark wrote on the Credit.com blog:

I received a letter stating there was a judgment against me from 9-13-2006 and they’re trying to get a wage verification from my employer, so they can garnish my wages. This is seven years old and I don’t ever remember being made aware of this. What can I do?

Another reader, Leslie, asked about a judgment she knew nothing about:

I live in Texas and just recently divorced, Nov 2012. I had no income for the past 17 years. I just discovered a judgment has been made against me for a loan at a credit union. I was the primary account holder of the checking account and had to be put on the loan in order for my husband to get it. I was never served anything for this judgment and had no idea it was on there until I had to refinance my home after the divorce. Do I have any recourse for this or do I just need to bite the bullet and work something out with them?

A judgment is a decision by a court describing the outcome of a lawsuit. Any amounts owed will be described in the judgment. With a judgment the creditor often has the ability to go after wages, bank accounts or other property to collect the judgment, depending on state law.

How to Find If You Have a Judgment Against You

In most cases, when a creditor gets a judgment against a consumer it will be reported on the consumer’s credit reports. That’s because court judgments are a matter of “public record” — information available to the public through the courts. That information, like bankruptcy or foreclosure data, is collected by companies that provide it to the credit reporting agencies.

Your first line of defense, then, is to check your credit reports. At a minimum, order your free credit reports from all three credit reporting bureaus once each year. Judgments will typically be listed under the section describing negative items on your report.

In addition, though, it’s smart to monitor your credit score each month which you can do for free through a service such as Credit.com’s free Credit Report Card. If a judgment does appear, you will want to know as soon as possible, for several reasons, not the least of which is that your score will likely drop significantly.

Your Options

What if you check your credit reports and find there is a judgment against you? You generally have three options.

1. Fight it.

Before a creditor gets a judgment against you, it must typically serve you with the summons and complaint. The procedure varies by state and by court, explains Robert Hobbs, deputy director of the National Consumer Law Center. Examples include “personal service” where the summons and complaint must be hand-delivered to the person being sued or “abode” service, where they serve notice on the last known residence, to a person of suitable age. A description of different types of service can be found on the California courts website, though again, keep in mind that the type of service required in your case will depend on several different factors.

“If a person hadn’t been properly served and knows the legal process, then they can type up a motion to vacate a judgment or a motion to set aside a judgment,” says Hobbs. “Then there will be a hearing.” But even if the judgment is successfully set aside or vacated, it may not be the last the debtor hears about the matter. “It may start all over again,” he warns.

Trying to handle this yourself can be tricky. “The truth is there is a reason that we have law school,” Hobb says. “The collection attorneys have gone to law school. They win hundreds of cases every week, thousands a year.”

But that doesn’t mean debtors shouldn’t fight back if they believe they have been the victim of improper service (sometimes referred to as “sewer service”). In 2009, for example, then New York Attorney General Andrew M. Cuomo’s office sued 35 law firms and two debt collectors in New York State in order to throw out an estimated 100,000 default judgments improperly obtained against New York consumers.

A consumer law attorney may be able to help you determine if you have a case against the creditor or collector who sued you to obtain the judgment. Most offer low-cost or free consultations and charge reasonable fees.

2. Pay if off or settle it.

If your financial circumstances have changed since the time you fell behind on the debt, you may now be able to pay the judgment, either in full or for less than you owe as part of a negotiated settlement. Make sure the creditor files a “Satisfaction of Judgment” with the court indicating that it has been paid. When you pay in full, they are required to do so within a specific time period, so don’t be afraid to push for that.

If you negotiate a settlement, ask the creditor or collection agency to agree to file a satisfaction of judgment when you pay the agreed upon amount. “Get everything documented” suggests Michael Bovee, founder of Consumer Recovery Network. “What I am seeing is that sometimes it’s not always followed through on. If the court records haven’t been updated within 60 days or so, you may have to file your own motion with the court.”

Paid judgments can be reported for seven years from the date that they were entered by the court, while unpaid judgments can be reported until the statute of limitations has expired — a much longer time period in most cases. That means that if the judgment is more than 7 years old, as in Mark’s case above, paying it should result in it being removed from your credit reports. It may take a little while, though, for the court and credit reporting agencies records to be updated. You should expect results within no later than 60 days after you have paid it.

3. Wipe it out in bankruptcy.

If there is simply no way you can pay the judgment and you don’t want it hanging over your head indefinitely, find out whether you can discharge some or all of it (erase it) by filing for bankruptcy. Most court judgments can be included in bankruptcy.

Whatever you do, don’t ignore a judgment. In most states, judgment creditors have 10 years or more to collect, and can renew judgments that remain unpaid for another decade — or longer. And that means at any time you may find your bank account or wages at risk (again, depending on state law). One of our readers wrote:

I have 2 judgments for credit card debt. One has already started garnishing some money from my bank checking account. I’m unemployed and there is very little money in that account.

To avoid an unpleasant — and potentially expensive — surprise, find out if there is a judgment against you. If there is, find a way to put it behind you.

Image: iStockphoto

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  • Lexis

    wanted to get an opinion on what to do about an issue I just was made aware of. I received a phone call this morning from a collections agency about my Chase credit card balance. I was unaware of any due balance since I rarely use this credit card and used it only for establishing credit when I was in college. I have a credit score of 796 with only my student loans and car as my debt. The billing statements were being sent to an old address according to both Chase and the collections agency. The collections agency connected me with a Chase manager to figure out what the charges were and on what date. Apparently, I had a $101.92 balance on a card from a Sept. 7, 2012 rental car charge that had gone to collections as of April 30,2013 at $310.40 due to late fees and interest. Having never made a late payment, minimum payment, or anything of the sort I was completely shocked that this had occurred. If I was aware of ANY charges they would have been paid in full at or before the due date as I ALWAYS DO. Well, the Chase manager was kind enough to take off the interest and late fees making my balance due $101.92 which I paid today. I then called the collections representative I had been dealing with to let him know that he should be seeing the letter from Chase regarding my account within a few days. I don’t want any blip on my credit report. How can I go about correcting this issue besides paying my balance due? The woman at Chase said that it’s out of her hands once it goes to collections. Is there anything I can do like write a letter to Experian, Transunion, and Equifax asking to delete the charged off credit card? I realize that this isn’t a large charge amount, but I’m very concerned about my credit being negatively affected. Any suggestions would be great!

    Thank you for your time.

    • Jade

      I am wondering if you checked your cc statements or have requested a statement for that time period… if in fact this charge is yours; you will have to pay it and I would pay the creditor directly and not the collection agency and do it in writing.

      In my experience, the original credit has never turned down money for a bill owed. Secondly, if the collection agency makes notation on our CRA that the collection has been paid; they are in violation of law because they did not collect the money. Two entities cannot collect on the same debt.

      SEE: United States of America VS NCO Financial Group: This collection agency violated the law in two ways: 1. They failed to report all dates of deliquency; 2. They were still trying to collect on a account that the consumer had already paid to another collection agency. In essence, they were commiting fraud.

      I hope this helps…

  • Jade

    I have a small claims judgement on my CRA. It has already been paid. However, it appears the judgement was placed on my CRA prior to the 30 waiting period mandated by the court for appeal purposes.

    Questions: Since the judgement is paid and the judgement was placed on my CRA prior to the 30 day waiting period; can I have this judgement removed due to violation of the courts mandate per 30 days waiting period…

    • Credit.com

      The waiting period would have only been for you to appeal the judgment to fight it. Since you paid the judgment, I’m assuming you didn’t fight it and the debt was valid. Which means the judgement is accurate and exists/occurred, even though you paid it and it will remain in your credit reports until it expires. (7 years)

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  • http://www.Credit.com/ Gerri Detweiler

    This is not an uncommon problem you’ve experienced. We wrote about it in this article: Credit Report Double Jeopardy Means Double Damage

    As for the unemployment issue, the procedures for this may be different than for consumer debts. We’ll have to suggest you talk with an attorney who handles unemployment disputes.

  • http://www.Credit.com/ Gerri Detweiler

    Unfortunately the judgments will remain on your credit reports for seven years from the date they were entered by the court (if they are paid). Until they are paid, they can be reported indefinitely. Making payments on judgments doesn’t help your credit scores. It sounds like you are doing what you can on that front.

    As for the tax liens, you may be able to get those removed from your credit if you qualify under the IRS Fresh Start program. I would encourage you to check that out: Getting a Tax Lien Off Your Credit Reports

  • http://www.Credit.com/ Gerri Detweiler

    Ian – First you can try disputing them and see what happens. If that doesn’t fix it then you will need to contact the court that is reporting it. Will you let us know what happens?

    A Step-By-Step Guide to Disputing Credit Report Mistakes

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  • Dawn

    In 2012 out of no where my bank accou t was frozen. After making calls i found out it was from a judgement that i never went to court for regarding dental work i recieved under my mothers insurance when I was in college. I paid the original balance and they lifted the hold on my account. Now almost a year and half later they send me a letter saying they put a lien on my house due to the unpaid interest. Can I be charged eight years interest on a judgement that never showed up on any of my credit reports and I was never mailed a bill for ?

    • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

      Judgments are a court issue. They can show up on your credit, but do not always.

      You can be sued without being mailed a bill. You can be charged interest on a judgment, rate set by the court, and allowed in your state, and for the life of a judgment. Judgment debt can result in a lien on real property (will vary by state).

      If you want to see if there are any holes in the process the judgment creditor followed, run your scenario by an experienced consumer law attorney that is familiar with judgment enforcement in your state.

  • http://www.Credit.com/ Gerri Detweiler

    That is absolutely not true. If you were a victim of id theft then the debt – and judgment – is not valid. However, getting a judgment vacated is not an easy process. Do you belong to any organizations the offer id theft resolution assistance? Through your auto or homeowner insurance for example?

  • Jmil

    Hi. I had a question I was hoping you could help me with. I am weeks away from closing on my first home and back when I was pre approved there was a judgment found on my credit report. Turns out it isn’t mine. It’s my fathers. I am a jr. At the time the lender said she would see what she could do. Now yesterday she tells me I need to dispute it. So I contacted equifax and sent in some supporting documents to prove that I am not my father. I started reading online and everyone is making it sound as though this is not going to be an easy task. I contacted the court house and they said there is nothing they can do. I contacted the plaintiffs attorney and they won’t help either. My father doesn’t even owe this judgment anymore and I asked the attorney if they could please submit a paper to the court saying it was satisfied and they refuse to do that. They said it won’t help me anyways. Is there any way to find out what company reported this to equifax? The court says they don’t know what company did it. They said they have multiple companies that do it and they don’t know which one did it. I have not lived in this home in 10 years and yet they added it to my report based on name and address because that address shows up for my previous address. I am scared this is going to hinder my first time buying a home. Please tell me what else I can do! Thank you!

    • http://www.Credit.com/ Gerri Detweiler

      I know this is incredibly frustrating, especially when you are on a tight deadline. First of all, in terms of correcting your credit report, your loan officer should be helping you here. Telling you just to dispute it with the bureau could hold up the process. Your loan officer should have access to something called “rapid rescoore” and if you can get something that identifies that this belongs to your father and not you then she can submit it to the credit reporting service they use to get the correction expedited.

      So how did you determine the judgment was your father’s and not yours? If you have any kind of documentation that shows it’s his then your loan officer should be able to get it corrected through the agency she uses.

      As for the other issue, if the judgment was satisfied then the judgment creditor is typically required to notify the court. (How quickly they must do so is a matter of state law, but the time period is usually short.) If they don’t, there may be financial penalties. But your father is the one who needs to insist they do that. Can you get him to put the request in writing to the plaintiff’s attorney? He should send the letter by certified mail. If they refuse, then I’d suggest he contact his own consumer law attorney or file a complaint against the judgment creditor/attorney with the Consumer Financial Protection Bureau.

      It does matter to him by the way, while it may not result in it being removed his credit reports right away paid judgments do have a different reporting period than unpaid judgments.

      I am appalled to hear the run around you are getting.

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    You need to get your hands on the court record. Is the court one that has records available on line? If not, do you have someone you know nearby that can go in and get a copy?

    What is your goal for this account? Fight it as bogus from the start? Pay and move on with life?

  • anna

    My bankruptcy was discharged in 01/2012. I included a judgement. I did my annual credit check this year and its now listed. Can I dispute it?

    • http://www.Credit.com/ Gerri Detweiler

      Including a judgment in your bankruptcy doesn’t erase it from your credit reports. Paid or satisfied judgments (which this one should fall under) can be reported for seven years from the date the judgement was entered by the court. So it depends on when this judgment was entered. It should be removed 7 years after that.

  • http://www.Credit.com/ Gerri Detweiler

    It will probably be off there before the exact date comes along. It’s not unusual for the agencies to remove it the month before it is due to expire. It would be a good idea to monitor your free credit score – hopefully an increase is coming! (It is satisfied, right? Unpaid judgments can be reported longer.)

  • Juan

    I am currently a few weeks away from closing on VA home loan. My Va Loan officer just notified me that i have 2 judgements against my wife and I. The loan is only in my name due to my wife’s bad credit. The judgement was in my wife’s name, but i was notified that in Illinois a judgement can also go against the spouse even if its not their bills. What can i do to get past this hurdle in time to close on my loan date which is supposed to be by the 24th of July.

  • http://www.Credit.com/ Gerri Detweiler

    It’s possible. The credit report may simply list the judgment amount but there may be interest and/or other fees added, depending on what is legal in your state. I’d recommend you read this article next: Creditor Gets a Judgment Against You – Now What?

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