Archive for the ‘Financial Literacy’ category

Judgment Day

November 30th, 2011

A client asks:

  • “I have a judgment from GE Capital that was issued in 10/2008.  How would I go about getting that removed from my credit?  Yes, it is mine.  Whom would I contact?  The court or the creditor?”

If by “removed” you mean, “make it go away,” the [only*] solution is to pay it.

Escaping Judgment

A judgment is a judicial (court) order establishing that a debt is valid. A judgment creates an automatic lien on any real property you own in the county where it was issued, regardless of when the property was/is purchased. It can be “transcribed” so that it applies in any other county in the state for about $10/county. A judgment is valid initially for 10 years, and is renewable indefinitely each 10 years. A judgment automatically earns interest at the legal rate (currently 8%), or at whatever rate the contract may specify (if it specifies a different rate). Judgments can be “imported” from state to state, but that requires legal work; however, in many cases, the cost of importing it can be added to the judgment, so wherever it goes, it grows and grows.

Judgments (or, rather, the right to collect on them) can be assigned (sold) like any other asset, and their value depends on whether you already own property, what it’s worth, etc. Judgment buyers are not subject to quite the exact same rules as bill collectors.

The only way to remove a judgment is to record a satisfaction, and that must be done by the person who holds the judgment. It is possible to negotiate satisfaction for less than the face value of a judgment.

A credit bureau can report a judgment in good faith as long as it’s still on the records in the county (even if it’s been satisfied) and the county records don’t show that it’s been satisfied (which people sometimes overlook when they pay them off).  If it has been paid, and you demand that the holder record the satisfaction, they are subject to penalties if you can prove payment and they don’t record the satisfaction within a specified time.

This is why, whenever possible, you want to resolve any debt claims before they are reduced to judgments.

I’m going to guess that’s not the answer you were hoping for….

For Every Rule, Exceptions…

*Payment is often the only practical solution to eliminate a judgment. However, it is possible to seek relief from a judgment through the court. This is often impractical for relatively small judgments, as it will involve legal fees and a minor lawsuit. It’s more likely to succeed if you do it promptly, and if there’s a valid argument that it shouldn’t have been issued in the first place. Here, where the debt is/was valid, your chances of success are slim. You can also have judgments modified or avoided in bankruptcy in some cases, but you need to deal with that while the bankruptcy is pending, and there’s no guarantee of success; a bankruptcy expert (I am not one) can provide better insight into your chances of success there.