It's much easier for a creditor to collect an unpaid debt once he wins a judgment against you. With a judgment, a creditor can put a lien on your house, garnish your wages or garnish you bank account. Even so, you might still be able to protect your assets.
Ask to Set Aside
A creditor can win by default if the debtor doesn't show up for the court hearing. If that's your situation, you can ask the court to set the judgment aside. To do this, you must give the court a valid reason for being a no-show, such as the creditor failing to notify you. You also need to show that if you'd actually presented a case the creditor might not have won the judgment.
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Each state has its own rules for how to request setting a judgment aside. The website for the court that issued the judgment may be able to provide you with the right forms and legal procedures. If the judge agrees to set aside the judgment, that doesn't make the debt go away. However, you'll have a chance to defend yourself against the creditor in court and prove that issuing a judgment was the wrong decision.
State and federal law limit a creditor's power to collect, even after she wins a judgment. For example, a creditor can't usually seize Social Security payments, child support or veteran's benefits to pay off your debts. In Washington state, a creditor has to leave at least $500 in your bank account if she garnishes it. If you want to claim an exemption to the judgment, file papers with the court identifying your exempt property. For example, if you live entirely on Social Security, your creditor can't collect. Like a set-aside motion, the exact paperwork varies state to state.
Negotiate a Deal
Even after your creditor wins a judgment, she might still be willing to settle for partial payments. Collecting with a judgment takes time and costs money. If you make an upfront offer to provide a lump sum payment, a creditor might decide to accept the low-hanging fruit rather than make the effort to collect all of it.
Bankruptcy is a drastic step that will hurt your credit and impact your finances, probably for years. However, the Skiba Law Group says on its website that if the court judgment is just the tip of your debt iceberg, it might be worth considering. Bankruptcy triggers an automatic stay that prevents most creditors from collecting on debt until you emerge from bankruptcy. If you can discharge the debt in bankruptcy — wipe it out — the debt legally vanishes and your creditor can never collect.