What Happens If You Don't Pay a Judgment? Your Legal Options

You ignored the lawsuit. You missed the court date. Now there's a judgment against you, and you're staring at letters demanding payment you don't have. The debt collector has legal muscle now, but you're not powerless.

A judgment gives creditors collection powers they didn't have before: wage garnishment, bank levies, liens on your home. But that judgment isn't the final word. You can still fight it, limit what they can take, or wipe it out entirely. Here's how.

What a Judgment Actually Means

When a court issues a judgment, you become legally obligated to pay. The creditor becomes a "judgment creditor" with the authority to collect through methods that go beyond phone calls and letters.

They can:

• Garnish your wages—typically up to 25% of your disposable income
• Freeze and drain your bank accounts
• Place liens on real estate you own
• Seize non-exempt personal property in some states

Most judgments last 10 to 20 years depending on your state, and many can be renewed. Interest continues piling on,often at rates between 5% and 12% annually.

But execution doesn't happen automatically. The creditor has to take additional legal steps to collect, which creates windows of opportunity for you.

Option 1: Vacate the Judgment

If you never showed up to court and the judge issued a default judgment, you can ask to have it set aside. This erases the judgment and forces a new trial on the underlying debt claim.

When You Can Vacate

You need a valid reason. Courts typically accept:

• Improper service: The creditor didn't properly notify you of the lawsuit. If they served the wrong address or left papers with someone unauthorized, the judgment is vulnerable.
• Excusable neglect: You missed the date due to hospitalization, family emergency, or another documented crisis beyond your control.
• Meritorious defense: You have a legitimate reason you don't owe the debt,statute of limitations expired, you already paid, identity theft, wrong person.

You must act fast. Most states impose 30-day to 1-year deadlines from the date of judgment. After that window closes, vacating becomes nearly impossible.

How to File

You file a motion to vacate with the same court that issued the judgment. You'll need to explain your reason, provide supporting evidence (medical records, proof of wrong address, payment receipts), and propose your defense to the underlying debt.

If the judge grants your motion, the judgment disappears from your credit report. The case resets, and you get another chance to defend yourself,this time properly.

Option 2: File an Exemption Claim

Even with a valid judgment, creditors can't take everything. Federal and state laws protect certain income and assets. Filing an exemption claim forces creditors to leave protected property alone.

Common Exemptions

Income exemptions:

• Social Security benefits (100% protected)
• SSI, veterans' benefits, disability payments
• 75% of your wages in most states,creditors can only garnish 25%
• Unemployment benefits
• Child support and alimony you receive

Asset exemptions:

• Homestead exemption,protects equity in your primary residence, ranging from $5,000 in some states to unlimited in Florida and Texas
• Vehicle equity,typically $1,000 to $6,000
• Retirement accounts,401(k)s and IRAs are largely protected
• Basic household goods and clothing

Exemptions vary wildly by state. Texas and Florida offer aggressive debtor protections. Other states are stingier.

How to Claim Exemptions

When a creditor initiates garnishment or levy, you receive notice beforehand. You typically have 10 to 30 days to file an exemption claim with the court or the agency handling the garnishment (often the sheriff's office or your employer).

You'll complete a form listing your exempt income and assets. Attach proof,bank statements showing Social Security deposits, pay stubs, retirement account statements.

Once you file, the garnishment pauses while the court reviews your claim. If granted, the creditor must stop or reduce collection from that source.

Option 3: Negotiate a Settlement

Judgment creditors often accept less than the full amount. They know collection is expensive and uncertain. If you can scrape together a lump sum,even 40% to 60% of the judgment,many will settle.

How Much to Offer

Start at 30% to 40% if paying a lump sum. Creditors are more motivated if:

• The judgment is several years old
• You have few assets to seize
• They've already tried and failed to garnish your wages
• They bought the debt for pennies from the original creditor

If you can't pay a lump sum, propose a payment plan. Expect to pay 70% to 100% of the judgment over 12 to 36 months.

Get It in Writing

Never make a payment without a written settlement agreement. The agreement must state:

• The total amount you'll pay
• The payment schedule if applicable
• That payment satisfies the judgment in full
• That the creditor will file a satisfaction of judgment with the court

Once you've paid, get a stamped satisfaction of judgment from the court. Send copies to the credit bureaus to remove the judgment from your credit report.

Option 4: File for Bankruptcy

Bankruptcy erases most judgments. It's the only tool that eliminates the debt entirely without paying.

A Chapter 7 bankruptcy discharges:

• Credit card judgments
• Medical debt judgments
• Personal loan judgments
• Payday loan judgments
• Deficiency judgments from repossessions

Judgments that survive bankruptcy:

• Child support and alimony
• Most student loans
• Recent tax debts (less than 3 years old)
• Judgments from fraud or intentional harm
• DUI-related judgments

Stopping Collection Immediately

The moment you file bankruptcy, an automatic stay goes into effect. All collection stops: garnishments, levies, foreclosure, repossession. Creditors must cease contact.

If a creditor is garnishing your wages when you file, they must stop and may have to return wages taken in the previous 90 days.

What About Liens?

Bankruptcy eliminates your personal liability for a judgment, but liens on property can survive. If a creditor recorded a judgment lien on your house before you filed, you'll need to deal with it when you sell or refinance.

In some cases, you can strip the lien through bankruptcy if there's no equity for the creditor to claim.

You can file for bankruptcy yourself or hire an attorney. Most Chapter 7 cases cost $1,500 to $2,500 in legal fees if you use a lawyer, or around $340 in court fees if you file pro se.

What Happens If You Do Nothing

Ignoring a judgment won't make it disappear. Creditors dig in. Garnishments start. Bank accounts freeze. Your paycheck shrinks by 25%.

If you have no income or assets worth taking,if you're "judgment proof",the creditor may not pursue collection. But the judgment sits there for a decade or more, accumulating interest. If your financial situation improves, they come back.

Judgment-proof status isn't permanent or foolproof. You're at risk the moment you get a job, inherit money, or open a bank account.

Check Your Options Before You Decide

Most people facing a judgment have at least two viable options. Your circumstances determine which makes sense:

• If you never received proper notice or the debt is invalid, vacate the judgment.
• If you have protected income being garnished, file exemptions.
• If you can scrape together a chunk of cash, negotiate.
• If you're drowning in multiple debts and this judgment is one piece, consider bankruptcy.

Take stock of your debts, income, and assets. Our bankruptcy screener helps you evaluate whether filing makes sense in under five minutes.

You're not the first person in this position, and the system has exits built in. Use them.