Court Judgment You Can't Pay? Your 3 Real Options in 2025

A creditor sued you. You lost. Now there's a judgment against you for thousands of dollars you don't have.

The court judgment isn't just a piece of paper. It's a loaded gun pointed at your paycheck and bank account. Once a creditor has that judgment, they can garnish your wages, freeze your bank account, or even put a lien on your house. The clock starts immediately.

You have three practical responses. Each one depends on your income, assets, and how aggressive the creditor acts. Here's what works, what doesn't, and when bankruptcy becomes your best defense.

Option 1: Negotiate a Payment Plan (Before They Garnish)

Call the creditor's attorney first. Not the original creditor—the law firm whose name is on the judgment paperwork. Ask if they'll accept monthly payments instead of going straight to garnishment.

Why would they agree? Because garnishment costs them money and time. If you offer $200 a month starting next week, some will take it rather than file garnishment paperwork and wait months for the first payment.

Be realistic about what you can afford. If you offer $150 a month on a $12,000 judgment, that's eight years of payments. Most creditors won't wait that long. Offer what keeps you fed and housed, but know they might counter with a higher amount or reject the deal entirely.

Get Everything in Writing

If they agree to a payment plan, demand a written agreement before you send one dollar. That document should specify:

• The total amount you owe
• Your monthly payment amount
• The payment due date each month
• What happens if you miss a payment
• Whether they agree not to garnish wages or levy bank accounts while you're current

Do not make verbal agreements with debt collectors. If they refuse to put it in writing, they're planning to garnish you anyway.

What If They Say No?

Many judgment creditors refuse payment plans. You just cost them court filing fees and attorney time. They want their money fast, and garnishment delivers that.

If they say no, ask how much they'd accept as a lump sum settlement. Some will take 60-70% of the judgment if you can pay it all at once. Borrow from family, cash out a 401(k) with caution, or consider whether bankruptcy makes more sense than paying a reduced lump sum.

Option 2: File a Motion to Vacate the Judgment

Courts can erase judgments under specific circumstances. This isn't a do-over because you didn't like the outcome. You need a legitimate legal reason.

Valid Grounds to Vacate a Judgment

Courts typically vacate judgments when:

• You never received proper notice of the lawsuit. If the creditor sued you but sent the summons to an old address and you never knew about the case, you can argue you were denied due process.
• The statute of limitations had expired. If the debt was too old to sue on in your state, the judgment is invalid.
• Mistaken identity. The creditor sued you but the debt belongs to someone else with a similar name.
• You already paid the debt. If you settled or paid in full before the lawsuit, the judgment is void.
• The creditor committed fraud. If they fabricated documents or lied to the court about material facts.

"I couldn't afford a lawyer" or "I didn't understand the paperwork" are not valid grounds. Courts expect you to respond to lawsuits even if you're broke.

How to File a Motion to Vacate

Start at the courthouse where the judgment was entered. Ask the clerk for the local form to vacate a judgment. Some courts call it a "motion to set aside" or "motion to vacate."

You'll need to file three things:

1. The motion itself, stating exactly why the judgment should be cancelled
2. A proposed order for the judge to sign if they agree with you
3. Proof that you sent copies to the creditor's attorney

Attach evidence. If you're claiming improper service, include your lease showing you lived elsewhere. If the statute of limitations expired, include a timeline proving the debt is too old. Judges need documentation, not just your word.

File the motion quickly. Most states give you 30-60 days after the judgment to file without needing special permission. After that window, you'll need to prove extraordinary circumstances.

The Hearing

The court will schedule a hearing. Show up. Bring extra copies of all your evidence.

The creditor's attorney will argue against you. They'll say you're just trying to dodge a legitimate debt. You need to prove the judgment is legally defective, not just unfair.

If the judge vacates the judgment, the creditor has to sue you all over again. That buys you time but doesn't erase the underlying debt.

Option 3: File Bankruptcy to Eliminate the Debt

Bankruptcy stops all collection activity the moment you file. The "automatic stay" freezes lawsuits, halts garnishments, and prevents bank levies. If a creditor has already garnished your paycheck, bankruptcy can't reverse those past garnishments, but it stops future ones immediately.

How Bankruptcy Treats Court Judgments

In Chapter 7 bankruptcy, judgments for credit card debt, medical bills, personal loans, and most other unsecured debts get discharged. The debt disappears. The judgment becomes unenforceable.

Some debts survive bankruptcy:

• Child support and alimony judgments
• Recent tax debts (usually less than three years old)
• Student loans (except in rare cases of undue hardship)
• Debts from fraud or intentional harm
• DUI judgments where you injured someone

If your judgment falls into one of those categories, bankruptcy won't help. For everything else, it's your most powerful tool.

Cost vs. Benefit

Chapter 7 bankruptcy costs $338 in court filing fees. If you hire an attorney, expect $1,000-$1,500 in most areas. If you qualify based on income, you can use free bankruptcy preparation tools to file without a lawyer.

Compare that to the judgment amount. If you owe $8,000 and face wage garnishment of $400 a month, bankruptcy pays for itself in three months.

Timing Matters

File bankruptcy before the creditor empties your bank account. Once they levy your account, that money is gone. Bankruptcy can't bring it back.

If garnishment has already started, file immediately. The automatic stay stops the garnishment, usually within 1-2 pay periods. Your employer gets a court order to stop withholding money from your check.

What Happens After a Judgment (If You Do Nothing)

Ignoring a judgment is not a strategy. Here's the collection timeline you'll face:

Weeks 1-4: The creditor's attorney sends you letters demanding payment. These are your last chance to negotiate before they move to garnishment.

Weeks 4-8: They file for wage garnishment or a bank levy. In most states, they can take up to 25% of your disposable earnings. Some states allow less. A few states (Texas, Pennsylvania, North Carolina, South Carolina) don't allow wage garnishment for most debts.

Months 3-6: Your employer starts withholding money from your paycheck. Your bank freezes your account if they file a levy. You scramble to pay rent with whatever's left.

Year 1+: The garnishment continues until the judgment is paid in full, plus interest. Most judgments accrue interest at 5-10% annually. A $10,000 judgment becomes $12,000 in two years.

Judgments last 10-20 years in most states and can often be renewed. This doesn't go away on its own.

Special State Rules That Might Help

Every state exempts certain income and assets from collection. These protections apply even after a judgment.

Income Exemptions

Creditors cannot garnish:

• Social Security benefits
• Supplemental Security Income (SSI)
• Veterans benefits
• Railroad retirement benefits
• Most pension payments

If your bank account contains only exempt funds, you can file a claim of exemption to get those funds released. The creditor has to prove the money isn't protected.

Asset Exemptions

Most states protect:

• Basic household goods and clothing
• A portion of home equity (the "homestead exemption")
• One vehicle up to a certain value
• Tools needed for your job

If a creditor tries to seize exempt property, file a claim of exemption immediately. You'll need to prove the asset qualifies for protection under state law.

When to Choose Which Option

Choose a payment plan if you have steady income and the judgment is your only major debt. You'll pay more in total because of interest, but you avoid the public record of bankruptcy.

File to vacate the judgment if you have strong evidence the judgment is legally invalid. Don't waste time on weak arguments. If you simply didn't respond to the lawsuit because you were scared or busy, vacating won't work.

File bankruptcy if you owe multiple creditors, can't afford meaningful payments, or the garnishment amount will wreck your budget. Chapter 7 bankruptcy eliminates most judgments in 4-6 months, and you can rebuild credit faster than you think.

The Bottom Line

A court judgment gives creditors legal authority to take your money. You can negotiate to slow them down, challenge the judgment if it's legally defective, or file bankruptcy to eliminate the debt entirely. Doing nothing means months or years of garnished wages and frozen bank accounts. Pick your response based on your financial reality, not your fear.