How to Handle a Default Judgment: A Complete Guide

Susan Kelly

Mar 02, 2023

Neglecting Lawsuits can lead to serious consequences, especially related to debts. Ignoring debt collections and not responding to court summons could result in a default judgment.

As per studies, about 70 percent of all debt collection cases end up in default judgment, which implies that seven out of ten borrowers might face wage garnish or worse verdicts, but what to do if you end up having a default judgment? It is what we are going to discuss today. So, walk through this article and get the answer to your query!

Default Judgment

As per the contract, you are legally bound to return borrowed money to creditors; it can be of any form, from a credit card to a stone card or a loan. If you don't pay back creditors, they can sue you or sell your file to debt collectors, who can also sue you.

If you don't respond to the lawsuit after getting multiple notifications on your mailing address, the court has no other option than to pass a default judgment against you. The creditors can do so under federal or state laws, and such judgments serve as lien on the property.

There may be some fees associated with the judgments, which can be attorney fees, court fees, interest, and collection costs, similarly the amount a creditor can collect, and the types of property that they can take also depend or vary as per state laws, judge rules and financial institution.

How to handle a Default Judgment?

Default Judgment often refers to Automatic Judgment due to ignoring and not responding to court notices and not entering a defense. The next phase can be wage garnishment or levy bank account, which enables the creditor to take money from the bank account and repay the debt. You can do a few things soon after receiving a default judgment or garnishment.

Information Gathering

The debt collection process is not a single-day job; it may span over many years, and then when the borrower doesn't respond or return the loan, the lawsuit is the option that remains in the end. Between all these years, the debt may be transferred or sold from one collector to another, and the chances of an error or discrepancies are higher in this case.

Therefore when a judgment or order is given, make sure that it is only for a debt that you owe and that the amount mentioned is correct, making sure to collect all the information, including:

  • Bills or their copies from your original creditor
  • Validation letter and any such documents from your debt collector
  • All kinds of court documents that you received regarding debt collection

Most importantly, if no notices were served or you never received any notices from the court and the court ordered the lawsuit, then the collector violated your consumer rights, and you can challenge the Judgment.

Take Professional Help

The best way to handle a default judgment is by seeking professional help; many individuals and service providers offer their services in this regard; take the ones that suit your budget and are easily approachable.

Also, seeking legal advice and equipping yourself with the necessary knowledge before addressing the default judgment is advisable. A small piece of legal advice can make a huge difference and is crucial in getting relief from the Judgment.

Your legal advisor or lawyer can help you identify any loopholes and talk through possible solutions that can set the course to avert the default judgment. Similarly, if the Judgment is based on incorrect information, your lawyer helps determine how to challenge it.

Set Your Course of Action

The first step of the solution is to recognize and analyze the problem; once you do that, you set the course of action or action plan that can lead you further in getting the desired results. In case of default judgment, you need to follow and start with the following actions:

  • Accept it
  • Settle for less
  • Challenge it
  • Go for debt relief

Accept the Judgment

Accepting the Judgment if you owe the money is the best thing; you can pay the lump sum amount to the creditor you can in one go, but if you can't, then you will mostly face wage garnishment or bank levy. You can take help from a credit counselor (non-profit) to analyze the budget and whether and how you can afford it.

Apart from that, you also have rights in this whole process, a legal process is followed to notify you of the garnishment, and if you find inaccurate, miscalculated values, you can file a dispute. Similarly, you can challenge a garnishment order if it prevents you from having access to necessities.

Settle for Less

In most cases, the creditors are ready to settle for less; they are willing to settle the judgment way less than you owe them; they are analyzing the situation and fear that you may end up filing bankruptcy, which can wipe the whole debt out.

Settling is the best option among all as both borrower and the creditor gets the benefit; the creditors get partial payment, and the borrower may avoid long wage garnishment and pay less; on top of that, the creditor, after receiving files satisfaction of judgment notion in the court.

Challenge the Judgment

The option of challenging the Judgment is always there; if there is any error in the Judgment or something is missing out, and the lawsuit doesn't explain it properly, you can talk to your legal advisor and challenge the Judgment. You have six months to respond and cite unfortunate circumstances like illness or travel.

Go for Debt Relief

Last but not least, if you look for all other options and there is no way you can get out of the debt situation, it's better to declare bankruptcy and go for debt relief by discharging the Judgment. For bankruptcy filing, you can consult with a bankruptcy attorney and determine whether it's a suitable option.

Final Thoughts

Handling a default judgment might be tricky at times. Still, if you follow the right course of action and apply the necessary steps, you eventually get the best suitable option to address and handle the default judgment. Getting legal help and hiring a legal advisory service is the fundamental step to proceed further in handling your default judgment.

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