To explain this term a bit more clearly, let’s create a scenario. Let’s say you owe a creditor $50,000. In case you are unable to repay that amount by the agreed term, the lender can file a case against you in court to take legal action in acquiring repayment from you. If the party suing you wins, you will receive a judgment.
The judgment creditor (the party who sued you) will then record this court-ordered money judgment and file it with the county or state in order to begin the legal process of collecting payments for your debt.
If you are unable to repay your remaining loan, the creditor can file for a judgment lien on your property. This means the lender can claim a certain value on your real estate and other assets in order to recoup the money you owe them.
In some states, the court will automatically place a lien on any property you own in the country even if the creditor doesn’t file the judgment against you.
Agreement for Judgment
In case you do have the funds to make repayments and want to avoid a judgment lien, you can make an agreement with the lender to pay a specific amount per month. This is called an agreement of judgment and will be part of a court order.
However, make sure you really are capable of making the agreed monthly payments and that you actually agree to the set amount. In case you default on the agreement, you are violating the court order.
A creditor usually has several years to collect from you, depending on which state you reside in.
Effects of a Judgment
Aside from having to repay your debt and risk losing your real estate and other assets, you could also face more problems if you have a judgment. It will be recorded on your credit report and can lower your score, so getting a mortgage or other type of financing will be even more difficult. Many home loan providers won’t even consider applicants who have judgments.
Usually, a judgment will remain on your credit report for about 7 years and 6 months. If that period has passed or you have already repaid your debt, you can contact the credit agencies and request to have the judgment removed from your records.