If you have a judgment against you, the first move is to pull the court paperwork, confirm exactly what you owe and to whom, and then pick a response before the creditor starts collecting. A judgment gives the winning party legal tools it didn’t have before: garnishing your wages, freezing your bank account, putting a lien on your home. It also grows. Interest runs from the date the court entered it, and in most states it stays enforceable for years, often decades once renewed. Speed matters more than almost anything else you’ll do here.
Get the Exact Details of the Judgment
You can’t respond to a judgment you only half understand. Before you decide anything, write down three things:
- The name of the judgment creditor — the person or company that won.
- The total amount owed, including any interest, court costs, and attorney fees the court awarded.
- The court that issued the judgment and the case or docket number.
Check whatever paperwork you received. If you never got the documents, or you’ve lost them, call the clerk of the court where the case was filed. Clerks can look up cases by your name and provide copies. Knowing the exact number and who holds the judgment is what lets you evaluate everything below.
Understand Why Waiting Hurts
The judgment amount isn’t frozen. Interest starts accruing the day the court enters it and keeps running until you pay in full. In federal court the rate tracks the weekly average one-year Treasury yield at the time of entry and compounds annually.1Office of the Law Revision Counsel. 28 USC 1961 – Interest State rates are set separately and typically fall somewhere between about 4% and 17%. On a $10,000 judgment at 10%, you owe an extra $1,000 after the first year, and the balance climbs from there.
The enforcement window is long too. Depending on the state, a judgment can be enforced for anywhere from 5 to 20 years, and most states let the creditor renew it before it expires. A creditor who stays on top of the paperwork can keep a judgment alive and growing for a very long time.
Your Four Real Options
Pay It in Full
If you can afford it, paying in full stops the interest, ends the threat of garnishment and levies, and closes the matter. The creditor is required to file paperwork with the court confirming the debt is satisfied once you pay.
Settle or Set Up a Payment Plan
Many creditors accept less than the full amount as a lump sum, or agree to structured payments. From their side, 60 or 70 cents on the dollar now often beats chasing the full amount for years. Get the agreement in writing before you send any money. The written agreement should state the total amount accepted, the payment schedule, and the creditor’s obligation to file a satisfaction of judgment with the court once you’ve paid what you agreed to.
Move to Vacate the Judgment
If you were never properly served with the lawsuit, or you had a legitimate reason for not responding, you can ask the court to set the judgment aside. In federal court, Rule 60(b) allows relief for reasons including mistake or excusable neglect, newly discovered evidence, fraud by the other party, or a judgment that is void because the court lacked jurisdiction over you.2Legal Information Institute. Federal Rules of Civil Procedure Rule 60 – Relief from a Judgment or Order For the most common grounds, you have to file within one year. State courts have similar procedures, and some deadlines are shorter. This is the option for people genuinely blindsided by a default judgment, and it works only if you move quickly.
File for Bankruptcy
Bankruptcy is a serious step, but it can eliminate or restructure judgment debt. A Chapter 7 filing can discharge most unsecured debts entirely, wiping out the judgment with them.3Office of the Law Revision Counsel. 11 USC 727 – Discharge Chapter 13 lets you keep your property while repaying some or all of your debts over three to five years under a court-approved plan.4United States Courts. Chapter 13 – Bankruptcy Basics Chapter 13 is particularly useful if the creditor has already put a lien on your home, because the repayment plan can address the lien as part of the restructuring. Filing also triggers an automatic stay that halts garnishments and levies the moment the case is on file.
What the Creditor Can Do While You Decide
Understanding the collection tools helps you gauge how urgent your response needs to be.
Wage Garnishment
A court can order your employer to withhold part of your paycheck and send it to the creditor. Federal law caps the amount at the lesser of 25% of your disposable earnings or the amount by which your weekly pay exceeds 30 times the federal minimum wage.5Office of the Law Revision Counsel. 15 USC 1673 Restriction on Garnishment At the current federal minimum wage of $7.25 per hour, the first $217.50 you earn each week is fully shielded. Some states cap garnishment at a lower percentage.
Bank Account Levy
A creditor can get a court order that freezes money in your bank account. The bank locks the funds and eventually turns them over. Unlike garnishment, a levy grabs a lump sum at once, and you typically get little warning before the freeze hits.
Property Liens
The creditor can record a lien against real estate you own. The lien attaches as a public record, and in most cases you can’t sell or refinance until the judgment is paid. If you do sell, the lien is paid out of the proceeds before you see any money.
Debtor’s Examinations
A judgment creditor can also ask the court to order you to appear for a debtor’s examination, sometimes called a supplementary proceeding. The creditor’s attorney questions you under oath about your income, bank accounts, property, and other assets. Federal Rule 69 authorizes this in federal court, and every state has an equivalent procedure.6Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution Skipping the examination is a bad idea. The court ordered you to appear, and failing to show up can result in a contempt finding, with possible fines or jail time. Show up, answer honestly, and assert any exemptions that apply.
Protect the Income and Property You’re Allowed to Keep
Federal and state laws shield certain assets and income from judgment creditors, but you often have to speak up to claim the protection.
Federal Benefits
Social Security, veterans’ benefits, Supplemental Security Income, and federal retirement benefits are protected from garnishment by judgment creditors.7eCFR. 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments When these funds are directly deposited into a bank account, your bank must automatically protect two months’ worth of deposits from any garnishment order. You don’t have to file anything for that automatic protection. If your account holds more than two months of benefit deposits, you may need to act to protect the excess.
State Exemptions
Every state protects some equity in a primary residence through a homestead exemption. Many also protect a vehicle up to a specified value, household goods, retirement accounts, and tools you need for your job. Amounts vary widely by state.
You May Have to Claim Exemptions
Exemptions aren’t always applied automatically. If a creditor garnishes your wages or levies your account, you may need to file a claim of exemption with the court within a tight deadline, often 10 to 30 days from the notice. Miss the window and the creditor can take money that should have been protected. Read every deadline on any garnishment or levy notice and respond immediately.
Don’t Move Assets to Hide Them
Transferring property to a friend or relative to put it out of reach is one of the worst things you can do. Courts can undo these transfers under fraudulent transfer laws when the transfer was made to avoid paying creditors, or when you received far less than the property was worth while you were already unable to pay your debts.8Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations In bankruptcy, a trustee can claw back transfers made within two years of filing. Outside bankruptcy, state law has its own look-back periods, and courts view any transfer made after a judgment with heavy skepticism. The usual result is worse than doing nothing: the creditor gets the asset back and the court can impose additional penalties.
If You Settle, Plan for the Tax Bill
When a creditor accepts less than the full amount, the IRS generally treats the forgiven portion as taxable income. A creditor that cancels $600 or more of debt is required to report it on Form 1099-C, and you’ll include that amount on your tax return for the year of the cancellation.9Internal Revenue Service. Instructions for Forms 1099-A and 1099-C Settle a $15,000 judgment for $9,000, and the remaining $6,000 can count as income.
There are exceptions. Debt discharged in bankruptcy is excluded from taxable income, and so is canceled debt when you’re insolvent — meaning your total debts exceed the fair market value of all your assets at the time of cancellation.10Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? The exclusion for canceled mortgage debt on a primary residence expired at the end of 2025 and has not been renewed as of 2026. If the settlement number is large, calculate the tax hit before agreeing to terms.
Close the File After You Pay
Paying isn’t the last step. Make sure the creditor files a satisfaction of judgment with the court, the document that confirms the debt is fully paid and releases any liens on your property. Without it, the judgment can sit on public records indefinitely and create problems the next time you try to sell property or a new creditor pulls your court records.
Don’t assume the filing happens on its own. Follow up in writing, set a specific deadline, and get a copy from the clerk once it’s filed. Most states impose penalties on creditors who unreasonably delay filing after receiving full payment. Keep that copy with your important records. It’s your proof the matter is closed.