The gavel comes down as the judge enters a civil judgment against you. With their decision, your creditors now have the legal right to extract payment from you. It could be a rough road ahead. Your wages could be garnished and some of your assets seized and sold. It is not a good situation. Could you have avoided it?
In principle, all judgments are avoidable. In practice, not so much. Sometimes circumstances beyond a person’s control lead to bad situations. But more often than not, there are ways to avoid losing your shirt in a civil judgment. Three such options are discussed below. Note that the third option is applicable before or after civil judgment.
Option #1: Pay Your Bills
Civil judgments are the result of people not paying their bills. So the first option is also the simplest: pay what you owe. There is zero chance of a civil judgment being entered against you if you don’t owe anyone. If you do owe money and are having trouble paying it back, the second option is your best bet.
In the meantime, a good way to simultaneously pay your bills and avoid judgments is to not overextend yourself. Learn to live within your means. Learn to establish and live by a budget. Learn to say no to credit card debt. The list goes on and on.
Unfortunately, we live in a consumer-driven society. We are told that a robust economy relies on spending. Therefore, we are encouraged to spend, spend, spend. A lot of us are way in over our heads. We are but one lost job away from debt collection and civil judgment. Get your finances in order and you greatly reduce the chances of losing your shirt.
Option #2: Work Out a Payment Plan
The second option is aimed at consumers with the financial means to pay off their debts, albeit slowly. It is rooted in the fact that people tend to get scared when debt collectors start calling. They feel like there’s nothing they can do, so they don’t even try.
The truth is that creditors are almost always willing to work with debtors who genuinely wish to make good on what they owe. There is a simple reason for this. Debt collection costs money, whether creditors attempt to collect themselves or turn debts over to judgment collectors.
A payment plan allows them to recover 100% of the debt just so long as the debtor keeps their promise to repay. Recovering 100% is better than recovering 50%, even if it takes longer. The point here is to negotiate with your creditors. See if you are able to work out an acceptable payment plan.
Option #3: Declare Bankruptcy
Bankruptcy is a legal tool individuals and businesses can use to stop collection efforts. For the purposes of this discussion, there are two types of bankruptcy. Chapter 7 results in the liquidation of assets. Chapter 11 allows the debtor to reorganize and repay what is owed.
This option can be implemented before a judgment occurs. It can also be implemented afterward. In the latter case, a bankruptcy would prevent the creditor from collecting on the judgment for the time being. But that may not be permanent, according to Salt Lake City’s Judgment Collectors debt collection agency. If a person files Chapter 11, the debt will eventually be repaid one way or another.
You don’t have to lose your shirt in a civil judgment. The three strategies discussed in this post prove as much. It is a mystery as to why so many people lose their shirts anyway.
