A Court Ordered Judgment is actually towards the end of a legal cycle. Before a judgment is entered against a business entity or a person(s) there must be a default or breach of a contract. In most of the cases we handle, there is a breach of a contract relating to the borrowing of money. A lending contract can include a credit card agreement, vehicle lending agreement, personal loan agreement, or mortgage contract. A typical breach involves non-payment of the contract or failure to pay the lender in a regular and timely manner as per the terms of the contract itself.
Once a breach occurs, the creditor will attempt to collect the debt or assign the debt to collections. If out-of-court collection efforts are not fruitful, then the lender or the third collection company, through its lawyer(s), will commence a lawsuit by filing a Complaint in a County or District Court. Said lawsuit will appear on the borrower’s credit report and result in a decreased credit score as well.
The borrower will have an opportunity to respond or file an “Answer” to the Complaint with the Court and put forth a meritorious defense to the lawsuit. After an answer is filed a hearing will be scheduled before a judge to determine if the debt itself is valid. If the borrower fails to answer the Complaint or the Judge rules in favor of the lender at trial, a “Judgment” will be entered in favor of the lender.
Of course, the entry of a Judgment will also appear on the borrowers’ credit report and result in a further reduction of their credit score. In addition to preserving your credit score, it is most important that once a judgment is entered against you, you take action to preserve your income and assets.
In Pennsylvania and/or New Jersey if a judgment was entered in a mortgage foreclosure action, said judgment will result in the County Sheriff listing the subject property secured by the mortgage for Foreclosure Auction. Once a foreclosure auction is listed, the homeowner still has options to keep their real property by way of filing a bankruptcy to stay the foreclosure sale and keep their property through a Chapter 13 repayment plan.
Another option is to file a Motion to Overturn the judgment if a defense to the foreclosure complaint was not alleged or new facts have emerged that were not alleged at the trial which the judgment stemmed from. In rare circumstances a homeowner/borrower can “reinstate” their loan, after a judgment has been entered, meaning the homeowner may pay the amount they are delinquent to the mortgagee in a lump sum inclusive of fees and costs associated with securing the subject judgment.
If a judgment results from a collection lawsuit due to a borrower’s failure to make regular and timely payments on a credit card, personal loan, medical debt or general collection debt there are several different methods of collections depending on the state the borrower resides in. Sadek Bankruptcy Law Offices limits its practice to assisting borrowers in Pennsylvania and New Jersey and therefore this article will only broadly cover those two states.
In Pennsylvania the most common collection actions on a monetary judgment are levy of bank accounts and/or taking and selling of personal assets by the local sheriff’s department. Often times people disregard or do not recollect the entry of a judgment and are reminded of said judgment when they are making a purchase and their bank card has been frozen due to a levy by the judgment creditor on their funds. Since most people have direct deposit through their employer, a levy of a bank account is the most efficient and common method for a judgment creditor to collect towards their debt.
In Pennsylvania personal assets such as furnishings, televisions, computers or any personal assets that the borrower has possession of may be taken and sold for the benefit of a judgment creditor. This type of collection activity is devastating for a borrower in that the replacement costs of personal assets far exceed any value that the creditor will receive. Further, it can be difficult for a borrower with a judgment and diminished credit to reacquire the necessities and assets found in a typical home.
In New Jersey, in addition to the above methods of collection on a monetary judgment, a creditor may garnish wages as well. Generally, in New Jersey up to 25% of wages can be garnished and paid towards the judgment creditor. Especially in times of high inflation and stagnant increase in hourly and salary pay, said garnishment can cause a severe financial detriment to a family who is already struggling.
If one has a monetary judgment against them from a credit card, personal loan, medical debt or general collection action, there are several choices to defend the judgment. If there is a defense to the judgment a borrower can file a Motion to Open the Judgment. For such a Motion to be successful and the judgment to be declared as void one must act timely, have a reasonable excuse why they did not respond to the judgment in the first place and have a meritorious defense to the action.
A meritorious defense is not an explanation why the borrower did not or could not pay towards the debt, that just confirms the allegations set for the in the Compliant. A meritorious defense is a set of new facts that will declare the judgment void, such as the borrower made and abided by an amended payment plan with the lender or that the borrower did pay towards the debt and the lender failed to credit said payments.
Another way to defend the judgment and stop collection activity against the borrowers’ assets is the filing of a bankruptcy. Whether the borrower files a Chapter 7 or Chapter 13 Bankruptcy matter, the automatic stay is imputed. The automatic stay serves the borrower by stopping all collection activity and protecting the borrower’s assets as well.
An ancillary benefit of Bankruptcy is that so long as one stays away from incurring new debt their credit score will likely rebound since the judgment is no longer collectible due to the bankruptcy filing. A bankruptcy is often used when the borrower does not have a defense to the lawsuit from which the judgment stemmed from nor does he/she/they have the resources to repay the judgment debt.
If you are struggling with debt or have a lawsuit or judgment against you in New Jersey or Pennsylvania it is most important to discuss your options with an experienced debt relief attorney. Sadek Bankruptcy Law Offices offers a free initial consultation to determine the legal strategy to best assist you. Please call our offices at 215-545-0008 in PA or 856-890-9003 in NJ. Thank you and we look forward to helping you!