Can’t Afford to Pay a Judgment? Here’s What You Can Do

A court judgment against you feels overwhelming. You may face wage garnishment, bank levies, or property liens. But you have options to protect yourself and regain control.

Your Three Main Options When You Can’t Pay a Judgment

When a creditor wins a judgment against you, you can take three paths:

• Negotiate a voluntary payment plan with the creditor
• File to have the judgment vacated or removed
• File bankruptcy to discharge the debt and stop collection

Negotiate a Voluntary Payment Plan

Contact the judgment creditor to discuss a payment arrangement. A voluntary plan can help you avoid wage garnishment or bank account levies.

Many creditors resist payment plans after winning a judgment. They spent money on attorney fees to gain collection powers. But some will still negotiate, especially if garnishment seems difficult.

If you’re facing a judgment for debt, our partner Solo can help you negotiate a settlement that works for your budget.

File to Vacate the Judgment

Courts can cancel or set aside judgments in certain situations. You’ll need valid grounds and proper documentation.

Research Your Local Laws

Each jurisdiction has specific requirements for vacating judgments. Visit your court clerk’s office to learn the process. They can explain procedures but can’t give legal advice.

Gather Your Evidence

Collect documents that support your case. You might have proof of payment, identity theft, procedural errors, or fraud. Strong evidence increases your chances of success.

Prepare Your Motion

Draft a formal motion requesting the judgment be vacated. Many courts provide templates on their websites. Clearly state your grounds and attach supporting documents. Follow all formatting requirements exactly.

Serve the Other Party

Deliver a copy of your motion to the opposing party. Proper service ensures they can respond to your request.

Attend Your Hearing

Present your arguments and evidence to the judge. Organize your materials clearly. Address any counterarguments the creditor raises. The judge will decide whether to grant your request.

File Bankruptcy to Eliminate the Judgment

Bankruptcy provides the strongest defense against judgment collections. When you file, the automatic stay immediately stops all collection activity.

The automatic stay halts wage garnishments, bank levies, lien recordings, and lawsuits. Creditors must stop contacting you immediately or face penalties.

The bankruptcy discharge eliminates your obligation to pay dischargeable debts. Credit card balances, medical bills, and most unsecured debts disappear. Judgments on these debts become unenforceable.

Some debts survive bankruptcy. Tax obligations and child support typically remain. But most consumer debts get wiped out completely.

If you’re considering bankruptcy, speak with a bankruptcy attorney for free to explore your options.

File Before the Judgment if Possible

Filing bankruptcy before a judgment offers advantages. The judgment won’t appear on public records or credit reports. You avoid having a lien recorded against your property.

A judgment filed after bankruptcy becomes unenforceable but doesn’t vanish. It remains visible on your credit report and public records. Recorded judgment liens may still attach to real estate.

What Happens When You Default on Debt

Missing a payment triggers your default interest rate. Lenders charge late fees and report the missed payment. Your credit score drops significantly.

Creditors usually hire collection agencies after several missed payments. Collection agencies work aggressively to recover the debt. Eventually, creditors may sell your account to debt buyers.

Your Rights With Debt Collectors

The Fair Debt Collection Practices Act protects you from abusive tactics. Third-party collectors can’t harass, threaten, or deceive you. They must follow strict rules about contact times and methods.

You have the right to dispute debts in writing. You can demand validation of the debt. You can also request that collectors stop contacting you.

Collectors who violate the FDCPA face penalties. You may be able to sue for damages.

How to Handle a Debt Collection Lawsuit

Creditors eventually file lawsuits to collect unpaid debts. A process server will deliver a summons and complaint. You’ll have a limited time to respond.

Response deadlines vary by state and court type. Many debt collection cases appear in small claims court. Missing your deadline results in a default judgment.

A default judgment is like forfeiting a game. The court automatically rules against you. The creditor wins without proving their case.

If you’ve been sued, our partner Solo helps you draft legal responses quickly and affordably.

Respond With a Written Answer

File an answer to the lawsuit complaint. Address each allegation specifically. Admit what’s true, deny what’s false, and claim lack of knowledge where appropriate.

Include any defenses you have. The court clerk can provide blank forms. They’ll explain the filing process but can’t advise on content.

Common Defenses Against Debt Lawsuits

You can challenge debts on multiple grounds. Perhaps you already paid the debt. Maybe the debt belongs to someone else.

Other defenses include statute of limitations violations, incorrect debt amounts, and improper documentation. Debt collectors must prove they own the debt and the amount is accurate.

How Creditors Collect on Judgments

Judgment creditors have three primary collection tools:

• Wage garnishment
• Bank account levies
• Property liens

Wage Garnishment Explained

Creditors can take a portion of each paycheck. Federal law limits garnishment to 25% of disposable earnings. Many states provide stronger protections.

Some states allow only 15-20% garnishment. Texas, Pennsylvania, North Carolina, and South Carolina prohibit wage garnishment entirely for consumer debts.

Certain income types are completely exempt. Social Security, disability, and retirement benefits typically can’t be garnished.

Bank Account Levies Explained

A levy freezes your bank account and removes funds. Creditors can take the full judgment amount if available. State exemptions may protect certain funds.

Banks must hold funds for a period before releasing them. You can challenge levies on exempt income. Act quickly to protect your money.

Property Liens Explained

Judgment liens attach to real property and personal property. Creditors record certificates of judgment in county offices. The lien stays until you pay or the judgment expires.

When you sell property, the lien must be satisfied. The creditor receives payment from sale proceeds. Homestead exemptions protect some equity in your primary residence.

Personal property seizures are rare. Exemptions protect household goods, clothing, and necessary items. Most people’s belongings have little resale value anyway.

Are You Judgment Proof?

Being judgment proof means creditors can’t collect from you. All your income and property fall under exemptions. Creditors can’t garnish or seize anything.

You’re likely judgment proof if you only receive Social Security benefits. Owning no real estate and having minimal personal property also helps. State exemptions determine what’s protected.

Even when judgment proof, creditors may still contact you. They hope your situation improves or you don’t know your rights. You can send a cease contact letter.

Take Action on Your Judgment Today

A money judgment gives creditors powerful collection tools. They can garnish wages, levy bank accounts, and seize non-exempt property. If you’re judgment proof, state and federal laws protect your assets.

Working people who can’t afford garnishment should consider bankruptcy. Filing eliminates both the debt and the judgment. You’ll stop all collection activity immediately. A fresh financial start is within reach.