If a creditor, debt collector, or debt buyer has sued you and won a judgment, you can still take steps to protect yourself and your assets from collection.

Judgments in California accumulate interest at 10% per year, and can be renewed by the judgment creditor every ten years. What started out as a small judgment can quickly become a large one.

Once a creditor has a judgment, they can garnish wages, levy bank accounts, and file liens on assets to collect the judgment. Creditors can do all these things simultaneously, although they can only collect one judgment amount.

Depending on the circumstances, you may have several strategies for resolving a judgment, including:

  • Filing Chapter 7 or Chapter 13 bankruptcy
  • Settling the judgment and filing a Satisfaction of Judgment
  • Vacating the original judgment

Discharging Judgments in Chapter 7 and Chapter 13 Bankruptcy

People are sometimes shocked when we tell them that judgments can be discharged in bankruptcy just like any other unsecured debt.

Even real estate title companies are confused by this fact. Title companies often think that an old judgment survived a bankruptcy just because it was a judgment. But in California, judgments can be discharged like any other unsecured debt.

If the judgment has already been reduced to a lien on assets, the process is more complicated. If you have a judgment against you, it is usually best to deal with it before the creditor has a chance to file a lien on your assets.

Settling Judgments

Once a creditor has a judgment, there’s nothing you can do, right?

Not exactly. The judgment does give the creditor additional leverage. For example, the creditor can use the judgment to garnish your wages, levy your bankruptcy accounts, and record liens on other assets.

But what happens if you are currently unemployed or living on social security? In that case, it may be difficult for a creditor to collect. In many situations, the creditor may be willing to settle with you for less than the amount of the judgment.

However, be sure to resolve all judgments well before buying or selling a house. Your options become very limited when you are under the time constraints imposed by a home purchase or sale.

In California, judgments accumulate interest at 10% per year and can be renewed every 10 years. So, you don’t want to ignore an old judgment. It is likely to follow you for the foreseeable future unless you resolve it.

Vacating Judgments

If a creditor claims to have served you with a summons and complaint in a debt lawsuit, and you can prove they did not serve you, there may be grounds to vacate a default judgment entered against you.

There are several situations in which you may be able to vacate a judgment or default judgment. They are (partially) addressed in California Code of Civil Procedure (CCP) sections 473(b), 473(b), 473(d) and 473.5. However, some of the grounds to vacate judgment are very time sensitive. You should contact an attorney as soon as you find out a judgment has been entered against you.

If you succeed in vacating the judgment, keep in mind you still have to relitigate the case. If you don’t have a good defense to the lawsuit, it can be more cost effective to file bankruptcy and discharge the judgment along with your other dischargeable debts.

Schedule a Free Consultation

To schedule a free consultation with Karen Ware, call 805-284-0760 or 818-668-9019 or use our online scheduling tool.