Understanding Judgments in New Jersey
Judgments occur when the plaintiff in a money lawsuit is successful in their claim. The court will award the plaintiff a certain amount of money, and a judgment against the defendant will give creditors the legal authority to collect this money.
An individual with a judgment against them may face several difficulties in their personal and professional life, so it’s very important for anyone dealing with a judgment to understand how they work and what can be done to deal with them.
Issuing of the Judgment
Before a judgment can be issued by the court, the creditor (whoever the debt is owed to) will need to file a lawsuit against the debtor (the person owing the debt) in an attempt to recover the total amount owed to them. Creditors can come in many forms, and when bills aren’t paid lawsuits can be initiated by a variety of sources, including:
- Credit card companies
- Utility companies
- Medical professionals
- Cell phone and internet providers
- Auto mechanics
Generally speaking, creditors won’t sue a debtor until they are several months past due on payments. Filing a lawsuit costs the creditor money, and so they will also make numerous attempts to reach the debtor before suing them for the money they are owed. An individual that is behind on their bills shouldn’t ignore these calls and contacts by the creditor as doing so may result in a “default judgment.”
Default judgments occur when a defendant fails to respond to a lawsuit or show up in court to defend themselves. Usually, the defendant in a suit will have 35 days to respond with an answer to a lawsuit or a default judgment will be entered against them.
There are several options to fight a lawsuit or negotiate with creditors before an issue reaches the point of default judgment. It’s best to consult with an experienced attorney as soon an individual falls behind on their bills to discuss their options and strategies for avoiding lawsuits and judgments.
Even when a judgment has been entered against a defendant there are still some options to fight it. Judgments can be reversed for several reasons including:
- Error: a judgment may be challenged and reversed if it can be demonstrated that the defendant did not receive proper notice, or that they are not the right defendant (i.e. the debt in question is not theirs to begin with). It’s crucial to move quickly if making an argument based on error.
- Excusable Neglect: for default judgments issued in the previous 12 months, a defendant may be able to reopen the matter if they can demonstrate that they had a good reason for failing to file an answer within the original 35 day timeline. The reason will need to be more than a simple mistake as the courts take these deadlines very seriously.
- Meritorious Defense: along the same lines as an error, a judgment will be reversed if the defendant can provide a valid reason why the lawsuit against them should not have resulted in a judgment, including:
- The debt was paid in full
- The debt was partially paid and significantly less is owed than was sued for
- The defendant never entered into a contract for the goods or services claimed by the plaintiff
- The debt is not owned by the plaintiff. It’s the plaintiff’s responsibility to prove that the debt belongs to them, and in some instances where a debt has been bought and sold multiple times to different collection agencies this isn’t always easy to prove.
Timing plays an essential role in successfully fighting a judgment. It’s crucial to get an early start when dealing with creditors who are threatening a lawsuit. Judgments are not easy to fight, and creditors can attempt to collect on them for years. However, before a judgment is issued there is a set period of time for which the creditor can make collection attempts and/or initiate a lawsuit. This is called the statute of limitations.
In New Jersey, there is a six-year statute of limitations on collecting a debt. This means that a creditor can no longer make attempts to collect on a debt once six years have passed since the original date that payment was owed.
If a creditor or collection agency attempts to collect on a debt past this statute of limitations they can be subject to penalties. Anyone facing collection attempts on debts that are several years old should consult with an attorney to discuss the options available to them.
How Judgments are Collected
Unfortunately not every judgment can be successfully challenged or reversed. If a judgment is issued properly, the creditor will have several methods of collecting the money owed to them, including:
- Wage garnishments: Creditors with judgments against an individual can go after a percentage of the debtor’s wages by contacting their employer and having the money separated from the paycheck before its issued and given directly to them.
- Levy bank accounts: Creditors can also apply to the court for an order to turn over money in the debtor’s bank accounts to them in order to satisfy the judgment.
- Levy personal property: The creditor may also request that the sheriff place a levy on an individual’s personal property (jewelry, electronic equipment, automobile, etc.) and sell the items at a public sale. The individual, in this case, may designate $1,000.00 worth of property as exempt from the sheriff’s levy.
- Liens on real property: The creditor may also be able to go after a debtor’s real property located within the state by acquiring a statewide lien.
Liens on real estate can have serious impacts on an individual’s ability to sell or refinance the property in the future. If the creditor successfully brings their claim in New Jersey’s Law Division, a judgment lien will automatically be created on the debtor’s present and future property located anywhere in the state. If the claim is brought in New Jersey’s Special Civil Part (for claims of $15,000 or less) the creditor will need to have the judgment docketed in the Law Division before getting the lien.
These liens will remain attached to the property for 20 years, however, they will be affected by factors like other liens on the property or legal proceedings like foreclosure and bankruptcy. A person facing liens on their property should consult with a bankruptcy attorney immediately to discuss the options available to them.
One way to deal with a judgment is by getting the creditor to issue a warrant of satisfaction stating that the judgment is no longer owed. This will only be issued if the judgment is paid in full or the parties come to another arrangement through settlement.
Sometimes when a person has no assets or income it will be clear to the creditor that collecting in full on a judgment is not likely. In these circumstances, where the debtor is considered “judgment proof,” it’s likely that the creditor will be open to receiving a lesser amount in satisfaction of the judgment.
Settling judgments in this manner requires contacting the creditor directly and making a convincing argument for why they should accept the less than what is legally owed to them. Creditors deal with judgments all the time and are typically very savvy negotiators, so it’s usually best to retain an attorney experienced in dealing with these sorts of matters to initiate the settlement negotiation on one’s behalf. The cost of hiring an attorney for these negotiations is often much less than the amount they are able to save the debtor through settlement of the judgment.
Avoiding Judgments through Bankruptcy
Those that cannot afford to pay off or settle a judgment still have the option of filing for bankruptcy. When a bankruptcy petition is filed it initiates the automatic stay. The automatic stay is a judicial order halting all collection attempts including judgments, wage garnishments, lawsuits and foreclosures. This stay remains in place throughout the duration of the bankruptcy proceeding.
While a creditor may be able to resume collection attempts after the completion of a bankruptcy, it’s more likely that the debt in question will become part of the proceeding. Except for debts deemed non-dischargeable by the bankruptcy code, most debts and judgments can be either wiped out in Chapter 7 or paid to some lesser extent by filing for Chapter 13 bankruptcy.
There are several other factors that need to be considered before filing for bankruptcy, including eligibility of the individual filing, what kinds of debts they are seeking relief from and whether they want to keep certain kinds of property once the proceeding is complete. It’s best to consult with an experienced attorney to determine whether filing for bankruptcy is the best option for an individual at any given time.
Post Judgment and Other Considerations
Judgments and liens that have been satisfied may not automatically be removed from a person’s credit report. The individual may need to contact the credit reporting agency and supply them with the writ of satisfaction showing that the judgment is no longer owed and requesting its removal from their report.
Dealing with creditor lawsuits and judgments is often a difficult and intimidating process. It’s always best to get ahead of the problem by assessing one’s options before a lawsuit is filed or a judgment is issued. Consulting with an experienced attorney can provide an individual with insight into the various options available for dealing with these sorts of issues. At Rosenblum Law our attorneys are ready to help, call us today.