Judgment Creditor Meaning & Definition

Judgment creditor summary:

A creditor that has been awarded a legal judgment on a debt is called a judgment creditor.
A judgement is a decision made by a court to settle a dispute.
Judgment creditors have more ways to recover an unpaid debt, such as wage garnishment and property liens.

What Is a Judgment Creditor?

A judgment creditor differs from a regular creditor because they’ve been awarded a legal judgment on a debt. Any party that extends credit to another party, such as a lender or credit card company, is a creditor. The party that borrows money is the debtor.

Judgment creditors are creditors that have filed a lawsuit and been awarded a judgment against the debtor. At that point, the debtor becomes a judgment debtor.

Creditors typically try other debt collection methods before going the legal route. For example, a creditor may hire a debt collection agency to get the debtor to pay. If a creditor’s collection methods don’t work, then it could file a lawsuit and attempt to win a judgment.

A judgment creditor has more ways to recover a debt than a regular creditor. The judgment debtor could still pay willingly to resolve the debt, but if not, the judgement creditor could use collection methods enforced by a court.

A judgment is a decision made by a court on a legal matter. Judgments can be either monetary or non-monetary.

Monetary judgments are more common, especially in lawsuits about debt. In a monetary judgment, the court orders one party to pay a specific amount of money to another party. If a creditor successfully sues a debtor, then the court may award the creditor a judgment for the unpaid balance on the debt, including interest and any other fees charged.

More Judgment Creditor Details

Some of the most common collection methods used by judgment creditors are:

Wage garnishment. A wage garnishment order allows the creditor to take a portion of your earnings to pay your debt. Your employer takes that money out of your paycheck and sends it to the creditor every pay period. Federal law limits how much of a debtor’s wages can be garnished, and some states have their own higher or lower limits.
Property liens. A property lien gives the creditor a legal claim on property you own. It can be difficult to sell property with a lien. If you don’t pay the debt, then the creditor could repossess and sell the property. Some types of property are exempt and can’t be taken by creditors. Exemption rules depend on your state.
Bank account garnishment. A bank account garnishment order allows the creditor to take money out of your bank account to pay your debt. Like wage garnishment, bank account garnishment has some legal limits on the amount of your earnings that can be garnished. Some funds are protected. The creditor could take the entire amount approved in the garnishment order as long as it conforms to state law and doesn’t take funds such as Social Security, veterans benefits, or other protected funds.

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Judgment Creditor FAQs

The term judgment proof or collection proof is a little misleading. Many believe that if they don't have savings, property or income to cover a judgment that they're off the hook. In fact, even lawsuit losers who earn very low incomes (about $1,200 a month) may have up to 25% of their disposable earnings garnished.

In addition, judgments can last for many years and judgment creditors can renew them. Interest on what you owe continues to accrue and your balance increases. If your income improves in the future or you come into some money, your creditor may be right there waiting to grab it. You may truly be judgment proof if your income and assets are exempt from collection for instance if your income is all from Social Security and your only savings is in a 401(k).

Every state has a statute of limitations on enforcing judgments, but creditors may be able to renew a judgment multiple times or revive an expired judgment. Judgments are usually valid for several years before they expire or lapse. The length of time varies from state to state. For example, in New York it can be 20 years. In California, judgments can last 10 years and can then be renewed. Since a creditor may be able to renew a judgment, it could last much longer than you initially thought.

You are unlikely to get a garnishment order overturned. Courts rarely reverse debt judgments. You need to act before the judgment. Negotiate with the creditor to get the hearing called off. Or retain an attorney specializing in consumer debt law to act on your behalf. Or find a reputable credit counselor. Once the judgment is in place, your only hope is to pay the creditor what's owed (or a lower settlement sum) or agree on a repayment plan.