What Happens After a Default Judgment is Issued?

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When a creditor files a lawsuit for unpaid debt and you fail to respond, the court may issue a default judgment in favor of the creditor. This judgment gives the creditor legal authority to pursue collection actions to recover the debt.

Understanding what happens after a default judgment is issued and what steps you can take is crucial to minimizing its impact on your financial future.

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What is a Default Judgment?

A default judgment occurs when a defendant (you) does not respond to a lawsuit within the required time frame. This is typically 20 days plus the following Monday from the date of being served. When you fail to answer or appear in court, the creditor wins the case automatically, and the court issues a judgment for the amount claimed, including:

The principal balance.
Interest and penalties.
Court costs and attorney’s fees.

What Happens After a Default Judgment is Issued?

After a default judgment is granted, the creditor can use various legal tools to collect the debt. Here’s what you can expect:

Interest Accrual

The judgment amount begins accruing interest, typically at a rate specified by state law. This rate can be as high as 10% or more in many states.

Creditor Collection Actions

Once a creditor has a judgment, they can pursue several methods to collect the debt, including:

Bank Account Levies

Creditors can request a court order to freeze and seize funds from your bank account. Funds such as Social Security benefits, from garnishment, but it’s essential to assert these exemptions promptly.

Property Liens

Creditors can place a lien on non-exempt real property, such as investment properties or land. Your primary residence (homestead) is generally protected from liens under state law.

Turnover Orders

Creditors can ask the court to order you to turn over non-exempt assets, such as cash, valuable personal property, or non-homestead real estate.

Garnishment

Most states allow some form of wage garnishment for most consumer debts, creditors can garnish non-exempt income in other states or pursue bank levies as an alternative.

What Can You Do After a Default Judgment is Issued?

If a default judgment has been entered against you, there are still steps you can take to address the situation:

File a Motion to Vacate the Judgment

If you have a valid reason for failing to respond to the lawsuit, you may file a motion to vacate the judgment. Common reasons include:
- Improper Service: You were not properly served with the lawsuit.
- Mistake or Excusable Neglect: You missed the deadline due to a legitimate reason, such as illness or lack of understanding.
To succeed, you must act quickly and demonstrate that you have a valid defense against the lawsuit.

Negotiate with the Creditor

Even after a judgment is issued, many creditors are willing to negotiate a settlement. This may involve:
- Paying a reduced amount in a lump sum.
- Setting up a payment plan to satisfy the debt over time.
Always get any settlement agreement in writing.

How to Prevent a Default Judgment

If you receive a summons for a debt collection lawsuit, take these steps to avoid a default judgment:
1. Respond Promptly: File a written answer with the court before the deadline.
2. Assert Defenses: Raise defenses, such as:
  - The debt is time-barred (beyond the statute of limitations).
  - The creditor lacks proper documentation to prove the debt.
  - The amount claimed is incorrect.
3. Consult an Attorney: A debt defense attorney can help you draft your response and negotiate with the creditor.

Conclusion

A default judgment gives creditors powerful tools to collect unpaid debts, but it doesn’t have to be the end of the road. By understanding your rights and taking proactive steps, such as asserting exemptions, negotiating settlements, or filing a motion to vacate the judgment, you can minimize its impact on your finances. If you’re dealing with a default judgment, consider seeking legal assistance to explore your options and protect your assets.

Mike Weston, Esq.

Mike Weston is a seasoned debt lawsuit defense attorney and founder of Weston Legal. Since 2005, Mike has devoted his career to compassionately helping consumers struggling with issues involving their personal and business debts. Mike is grateful to have been able to help tens of thousands of clients become empowered with knowledge on the path to financial stability.