When an account goes unpaid, some creditors will file a judgment against you.
A judgment means a judge in a court of law has given the creditor permission to file a financial claim against you — hence the name “judgment.”
Sometimes a creditor will then pursue getting their money by taking it straight out of your paycheck, which is called garnishing your wages. It’s not fun to discover your paycheck is not what it should be, due to a garnishment!
Other times, a creditor will pursue taking the money out of your bank account. That discovery is equally disturbing!
Laws vary from state to state, and I am not an attorney, nor do I give legal advice. But here is how I would handle a judgment, if I discovered one against me.
First, I would look to make sure it belonged to me and not to someone with a similar name. If it’s my account, then I would make sure the balance owing is correct. For example, if I know I failed to pay a former landlord for two months’ rent and the amount makes sense, then I’d take responsibility. But if two months’ rent was $3,000 and the judgment was for $10,000, then something is wrong and needs an investigation.
Second, if the amount was small, such as less than a couple hundred dollars, I’d just pay it and put it behind me. But if the amount was significant or if I truly couldn’t afford to pay it, then I would negotiate a settlement to pay less, as per Chapters 15-16 in Repair Your Credit Like the Pros.
When asking for a settlement, sometimes you need to provide proof of income to show you truly cannot afford to pay the large account. Other creditors will offer a settlement right away without it. Law firms are more sticklers for documentation, as you might expect.
Get the settlement agreement in writing. No offer letter = no money. You must get it in writing. Verbal promises mean nothing. One of my book readers paid per settlement agreement, and a year later, another rep at the same creditor contacted him for the rest of the money. It’s a good thing he had the original agreement in writing! That shut down the new rep from pursuing a request for more money.
Don’t worry about the settlement stating “paid as agreed” or “pay to delete,” because judgments do not appear on your credit report now in 2023. Therefore, a judgment does not hurt your credit score.
The only public record that posts on credit reports now is a bankruptcy.
Just because the judgment is not on your credit report, that does not mean you don’t have to pay it. They can still pursue a garnishment against you. And a judgment will need to be paid before you can close on a home loan.
This is my opinion as someone who has worked in the mortgage business for 23 years and who worked for one of the nation’s top credit repair companies (in the past, before the owner died during Covid). This is not legal advice. For legal advice, consult with a local attorney who knows the laws in your state.
