You’ve been falling behind on your bills for a while when the worst happens. A creditor sues you.  With an inability to pay the debt, and limited options to combat the suit in civil court, you may find yourself with a judgment entered against you.

When a creditor sues for non-payment and gets a judgment against you, it gives the creditor legal permission to collect money from you without your consent. To compound matters, a judgment will typically have attorney’s fees tacked on and accrue interest for the life of the judgment, causing the debt to balloon – making a bad situation worse.

So, once a creditor has a judgment, what can they do? Judgment creditors have a few options for forced collections:

Wage Garnishment

Wage Garnishment is one of the most common methods for a judgment creditor to recoup money owed to them.  When an Earnings Withholding Order is sent to your employer, your employer must start deducting money from your paycheck.  In California, this amount can be up to 25% of your earnings.  The money that is deducted is then forwarded to the sheriff, who in turn sends it to the judgment creditor.  If nothing is done to stop the garnishment, this will continue until you have paid the judgment amount in full – putting a strain on your monthly income for a prolonged period of time. 

Bank Levy

Another option is the seizure of funds from your bank accounts.  When a judgment creditor forwards a levy order to your bank, the creditor will drain money directly from your bank accounts.  A levy can even affect bank accounts where you are a joint owner or, since California is a community property state, your spouse’s bank account – even if you yourself are not on the account.  Money taken directly from a bank account can put your other monthly expenses at risk.  Without the funds you rely on, you may have difficulty paying rent, your utilities, or other expenses necessary to maintain your household.

Seize Property

Though less common, just as they can take money directly from your bank account, a judgment creditor can attempt to seize personal property to repay the debt.  A common item in this circumstance would be a vehicle.  The judgment creditor would have a sheriff seize the personal item to auction off; the proceeds of which would be applied to what is owed.

Judgment Liens

Finally, the judgment creditor can file an Abstract Judgment against you.  This is a lien filed with the county recorders that will automatically attach to any property you own. If you own a home or other real property, the lien will encumber the residence and cannot be removed until it is paid in full.  If you sell or refinance the property in future the lien amount – which will include any interest accrued during the life of the judgment – will need to be satisfied in full.  Though rare, the creditor could enact a sheriff’s sale on the property which is a forced sale at auction.  If there is sufficient equity in your home for the creditor to be paid in full, a creditor may endeavor to have the home sold without your consent.

If you do not own real property, an Abstract Judgment filed against you is assigned to you as an individual. If you purchase property in the future, inherit property or otherwise transfer your name on title to any real property, the lien will automatically attach to the property at that time.

Do Judgments Expire?

Yes.  Judgments last for 10 years, at which point they can be renewed.  Unfortunately, this means that the judgment creditor does not typically allow the judgment to expire and will simply renew the judgment once every 10 years.

How can Bankruptcy help?

With the threat of property seizure, shrinking wages and drained bank accounts, you may be wondering what options are available to you once a judgment is placed against you.  Fortunately, bankruptcy is a great option to stop any action being taken against you.

When you file for bankruptcy, you are protected by the bankruptcy court and the judgment creditor is stayed from enforcing their judgment.  Wage Garnishments stop and future bank levies are halted.  If your property was seized or money was already taken from your bank account, many times these items can be returned to you.  Even wages that were garnished can sometimes be returned.  Timing is important when it comes to recovering an asset, so it is best to reach out to a local bankruptcy attorney as soon as a judgment is enforced. If you wait too long to take action, you may lose the ability to retrieve those items from the lender.

Finally, if you have a judgment lien recorded on your home, bankruptcy may be able to avoid that lien so that it is no longer encumbering your property.  Not everyone will qualify for lien avoidance, so as always, it is important to discuss your financial situation with a reputable attorney for further guidance.  Since not all liens can be removed from a residence, it is always best to speak to an attorney as soon as a judgment is entered against you.  If you file bankruptcy before they record a lien, the judgment creditor will be barred from doing so in the future.  However, if they have already filed a lien, you may or may not be able to get the lien removed.  As such, it is always best to try and file before the lien is recorded.

If you are considering filing for bankruptcy, reach out to a local bankruptcy attorney in your area.  Winterbotham Parham Teeple, a PC practices throughout Southern California, including Riverside County, Los Angeles County, San Bernardino County and Orange County.  If you live in the area and need a free consultation to discuss what would work best for you, feel free to visit our website or call us directly at (800) 400-9000.