When a default judgment is entered against you in a lawsuit, it means that the court has ruled in favor of the credit card company or creditor because you failed to respond to the lawsuit or did not appear at a hearing. Essentially, you lose the case by default. Once a default judgment is entered, there are several important consequences and potential next steps for both you and the creditor. Here’s what typically happens:
Default Judgment Entered
After the creditor files for a default judgment, the court will review the plaintiff’s evidence and, assuming everything is in order, issue a judgment in their favor. The judgment typically includes the amount you owe, which may include the original debt, interest, fees, and possibly the creditor’s legal costs. A default judgment can have a significant impact on your credit score. It will show up on your **credit report** and remain there for up to 7 years. It can severely damage your credit score, making it harder to get approved for future loans, credit cards, or mortgages.
Once the judgment is entered, the credit card company or creditor can begin enforcing the judgment to collect the debt. This may involve a variety of collection actions: If you have a bank account, Capital One could obtain a bank account levy. This means the creditor can direct the bank to seize funds from your account up to the amount of the judgment. Once the levy is in place, the bank will freeze the funds and send them to the creditor to satisfy the debt.
The creditor may place a lien on your property, such as your home or car, which prevents you from selling or refinancing the property without first paying the debt. This lien will remain in place until the debt is paid, and in the case of real property (like a home), it could affect your ability to sell or borrow against the property.
If you are facing a default judgment, there may still be steps you can take to either stop or reduce the collection efforts: If you didn’t respond to the lawsuit due to a valid reason , for example you didn’t receive the papers, you were unaware of the lawsuit, or there was an error in the process, you can ask the court set aside the default judgment. This means the court essentially “erases” the judgment, and the case can proceed as though the judgment had never been entered.
To do this, you must file a Motion with the Court explaining the reason for your failure to respond and demonstrating a valid defense to the debt or the lawsuit. Even if the default judgment has been entered, you can still try to negotiate with the creditor or their attorneys to settle the debt or arrange a payment plan. Often, creditors are willing to accept a settlement for less than the full amount owed, especially if it means they can get some payment rather than nothing.
Bankruptcy can wipe out many types of debt, including credit card debt, in Chapter 7 or Chapter 13 bankruptcy. If you’re unable to pay the judgment or deal with the collection efforts, filing for bankruptcy could offer a fresh start.
If a default judgment has been entered against you, it’s critical to act quickly and consider your options. Seeking legal counsel can help you navigate the next steps and determine whether vacating the judgment, negotiating a settlement, or filing for bankruptcy is the best course of action.
If you have any questions about the topic discussed in this article, or any bankruptcy law matter, please give us a call at Bononi & Company in Greensburg, PA 724-832-2499.