How Creditors Enforce Judgments (You Won’t Believe What They’re Doing)
When you owe a creditor money, they can enforce their judgment to collect the debt. This process of enforcing judgments can be complex and intimidating, leaving many feeling like they’re navigating uncharted waters.
Learning how creditors enforce judgments comes down to knowing your rights and the debt collection tactics they use to recoup losses on unpaid debts.
This article will explore all aspects of this complicated issue, so you don’t find yourself sinking without a lifeline.
What is a Creditor Judgment?
A creditor judgment is a court order that requires an individual or entity to pay money to a person who claims to be owed. It’s usually issued after the creditor has taken legal action against the debtor and won through a settlement or a trial.
In some cases, creditors may obtain a default judgment if they can prove they served notice of the lawsuit on the defendant but never received any response in return.
Creditor judgments are legally binding and must be followed by both parties involved. The judgment will specify which party owes what amount of money and when it needs to be paid back. If payment isn’t made as outlined by the judgment, further action may need to be taken to enforce it.
How Are Creditor Judgments Enforced?
Once a creditor is granted a judgment, it is up to them to enforce it. This can happen in several ways and vary based on the state laws and the type of debt owed.
Generally, creditors will rely on one or more methods for enforcing judgments, including:
- Real estate liens—legal documents that attach to real estate owned by the debtor and allow the lender to collect their money when the property is sold or refinanced.
- Bank account levy—allows creditors to seize funds from any accounts containing the debtor’s name.
- Property seizure—repossession of tangible property, such as cars and jewelry, if used as collateral against a loan.
- Garnishment of wages—wages are withheld by court order from a paycheck to repay the debt
- Collection agencies—creditors may hire collection agencies specializing in collecting debts while charging reasonable fees according to industry standards.
In many cases, creditors must take further steps beyond these measures before they can finally recoup their losses due to delinquent payments made by the debtor.
Let’s look at some of the above options in more depth.
Garnishment of Wages
Garnishment of wages is a common method used by creditors to enforce judgments. The amount taken out depends on several factors, including state laws, federal regulations, and exemptions provided in both areas.
Generally, up to 25% can be deducted from someone’s salary if they have failed to pay back a debt owed to another party. In addition, any tax refunds due may be intercepted by creditors.
Bank Account Levy
A bank account levy involves the creditor obtaining an order from the court to freeze their debtor’s banking accounts, seizing any funds in them as payment for the debt owed.
Four things happen during this process:
- The debtor is notified of the pending action.
- Funds within the account are frozen until further notice.
- Creditors can take possession of whatever money is available up to the amount of debt owed.
- Any remaining balance after debt payment is returned to the debtor.
Throughout this enforcement process, creditors must remain vigilant with communication and paperwork related to the judgment and its subsequent actions against the debtor.
Real Estate Liens
When a lien is filed, the creditor becomes what is referred to as an “owner” of the debtor’s home or piece of land, even though they don’t take possession. If they do not pay off their debt within a certain time, the creditor may eventually be able to foreclose on that property.
The process for filing liens varies from state to state but generally requires documentation like proof of debt owed and legal notice sent to the debtor.
After all, preparations are made, the court will issue a judgment granting the lien, which must then be properly recorded with county recording offices for it to become effective. A real estate lien remains active for up to 10 years before it expires unless extended through legal action taken by either party involved.
Personal Property Seizure
Once a creditor has obtained a judgment, they can attempt to enforce it by seizing the debtor’s personal property.
This is done via an action called execution, which allows the sheriff or other court-appointed officials to seize any of the debtor’s tangible items that are not exempt from being taken and sold at auction to pay off the debt. The seized items could range from furniture, appliances, and jewelry to cars, boats, and planes.
The amount recovered through this process depends on how much can be realized from selling these items. In some cases, creditors may settle for less than what was specified in the judgment if they believe that it would be difficult to recover more money due to either lack of saleable assets or because no interested buyer is willing to bid high enough during the auction.
Defend Your Consumer Rights — Call Ware Law Firm
When it comes down to it, creditors want their money just like everyone else.
However, they must take certain measures to get what’s owed them. If you’ve been on the receiving end of some unfair or unlawful debt collection practices, you have the right to get help.
Call Ware Law Firm today for a FREE case review.