If you have a judgment against you, the first move is to get the paperwork, confirm what you owe and to whom, and then choose among four real options: pay it, settle it, ask the court to vacate it, or file for bankruptcy. Doing nothing is the expensive choice. A judgment accrues interest from the day it’s entered, can last a decade or two, and gives the creditor legal tools it didn’t have before, including wage garnishment, bank levies, and liens on your property.
How much time you have depends on which option you’re pursuing, but some deadlines are short. If you were never properly served or have grounds to challenge the judgment, that window can close in as little as a year, and sometimes sooner under state rules. If a garnishment or levy notice has already arrived, you may have only 10 to 30 days to claim exemptions before protected money is taken anyway.
Get the Judgment Details First
Before you decide anything, pin down three facts:
- 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 and case number.
Start with any paperwork the court mailed you. If you don’t have it, call the clerk of the court where the case was filed. Clerks can search by name and give you copies. You cannot evaluate a settlement offer, a motion to vacate, or a bankruptcy filing without knowing the exact number and who holds the right to collect it.
Understand what you’re up against while you gather this information. Interest keeps compounding from the date of judgment until you pay in full. Federal court judgments carry a rate tied to the one-year Treasury yield;1Office of the Law Revision Counsel. 28 USC 1961 – Interest state rates typically run from roughly 4% up to 17%. On a $10,000 judgment at 10%, you’re a thousand dollars deeper after one year. Enforcement periods across states generally range from 5 to 20 years, and most states let creditors renew before expiration and start the clock over. This is not a debt that quietly goes away.
Your Four Options
Pay in Full
If you can afford it, paying in full stops the interest, ends the threat of garnishment or levy, and clears the matter. The creditor is then required to file a satisfaction of judgment with the court. Don’t skip the follow-through on that filing — more on it below.
Negotiate a Settlement or Payment Plan
Many creditors will take less than the full amount in a lump sum, or agree to structured payments. Sixty or seventy cents on the dollar today is often more attractive to them than years of chasing you.
Get every term in writing before you send a dollar. The agreement should state the accepted amount, the payment schedule, and the creditor’s obligation to file a satisfaction of judgment once you’ve completed payment.
One warning on settlements: if the forgiven portion is $600 or more, the creditor will generally issue a Form 1099-C, and the IRS treats the forgiven amount as taxable income.2Internal Revenue Service. Instructions for Forms 1099-A and 1099-C Debt canceled in bankruptcy is excluded, and so is canceled debt to the extent you were insolvent when it was canceled — meaning your debts exceeded the fair market value of your assets at that moment.3Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? Run the tax math before you agree to a settlement number.
File a Motion to Vacate
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 mistake or excusable neglect, newly discovered evidence, fraud by the other party, or a judgment that is void — for instance, because the court lacked jurisdiction over you.4Legal Information Institute. Federal Rules of Civil Procedure Rule 60 – Relief from a Judgment or Order For the most common grounds, the deadline is one year from the judgment. State courts have parallel procedures, sometimes with shorter deadlines.
This is the path with real leverage if you were genuinely blindsided by a default judgment, but only if you move quickly.
File for Bankruptcy
Bankruptcy is a serious step and it can eliminate or restructure judgment debt. Chapter 7 discharges most unsecured debts entirely, wiping out the judgment with them.5Office of the Law Revision Counsel. 11 USC 727 – Discharge Chapter 13 lets you keep property while repaying some or all of your debts over three to five years under a court-approved plan, and can address a judgment lien on your home as part of the plan.6United States Courts. Chapter 13 – Bankruptcy Basics The moment you file either chapter, an automatic stay halts garnishments, levies, and other collection activity.
Protect Your Income and Property
Federal and state law put certain money and property beyond a creditor’s reach, but you often have to assert those protections yourself.
Federal Benefits Are Protected
Social Security, Supplemental Security Income, veterans’ benefits, and federal retirement benefits are protected from garnishment by a judgment creditor. When these payments hit your bank account by direct deposit, the bank must automatically protect two months’ worth of deposits from any garnishment order without you doing anything.7eCFR. 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments If the account holds more than two months of benefit deposits, you may need to act to protect the excess.
Wages get partial protection too. Federal law caps garnishment at the lesser of 25% of disposable earnings or the amount by which weekly pay exceeds 30 times the federal minimum wage, which shields the first $217.50 of weekly earnings at the current $7.25 minimum.8Office of the Law Revision Counsel. 15 USC 1673 Restriction on Garnishment Some states cap garnishment more tightly.
State Exemptions
Every state has its own list. Most protect a certain amount of home equity through a homestead exemption, and many protect a vehicle up to a set value, household goods, retirement accounts, and tools of your trade. Dollar amounts vary widely.
Claim Exemptions on Time
Exemptions are not always applied automatically. If your wages are garnished or your bank account is levied, you usually have to file a claim of exemption with the court, and the deadline is often just 10 to 30 days from notice. Miss it and the creditor can take money that would have been protected. Read every notice the day it arrives and calendar the response deadline immediately.
Do Not Move Assets to Hide Them
Transferring property to a friend or relative to keep it away from a creditor tends to backfire. Courts can undo the transfer under fraudulent transfer laws when it was made with intent to avoid creditors, or when you received far less than the property was worth while unable to pay your debts.9Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations In bankruptcy, a trustee can claw back transfers made within two years before filing. Outside bankruptcy, state law sets its own look-back periods, and courts treat any post-judgment transfer with heavy skepticism. The typical result: the creditor gets the asset anyway, plus penalties.
If You’re Ordered to a Debtor’s Examination
A creditor with a judgment can ask the court to order you to appear and answer questions under oath about your income, bank accounts, and property. Federal Rule of Civil Procedure 69 authorizes this in federal court, and every state has an equivalent.10Legal Information Institute. Federal Rules of Civil Procedure Rule 69 – Execution
Show up. Failing to appear can result in a contempt finding, with fines or jail on the table. The examination itself is manageable: answer honestly, and assert any exemptions that apply to the assets discussed. Lying under oath creates a far bigger problem than the underlying judgment.
Are You “Judgment Proof”?
Being judgment proof doesn’t mean a creditor can’t win against you. It means that, right now, you have no non-exempt income or property they can seize. If your only income is exempt federal benefits and you own no non-exempt assets, the creditor has nothing to collect against today.
That status is a snapshot. If you later get a job, inherit money, or buy property, the judgment is still there — accruing interest the whole time — and the creditor can act on it then.
After You Pay, Get the Satisfaction Filed
Paying isn’t the last step. The creditor needs to file a satisfaction of judgment with the court, which confirms the debt is paid and releases any lien on your property. Without it, the judgment can sit on public records indefinitely and cause problems when you try to sell property or when another creditor pulls your court history.
Don’t wait for the creditor to remember. Send a written request with a specific deadline. Most states impose penalties on creditors who unreasonably delay filing a satisfaction after full payment. Once it’s filed, get a copy from the clerk and keep it with your records. That copy is your proof the matter is closed.