Having debt can be a nerve racking experience, today; it is quite easy to rack up thousands of dollars in debt in just a short period without fully understanding all of the consequences. If you find that you are in debt, you should know just how creditors can make claims of their debt and try to receive repayment for their debt legally.
A judgment is a court ordered lien. If a creditor has trouble receiving repayment from a debtor (either the debtor stopped payment or has reduced the amount that he or she pays over a period of time), the creditor can request the help of the civil court to encourage the debtor to repay their debt. In most cases, a judgment will be a black mark on your credit report and allow even further legal action to take place to repay your debt to a creditor such as a bank levy, wage garnishment or court repayment plan.
A bank levy is when a creditor that has a judgment against you requests that your bank account be frozen and any assets be seized up to the amount that you owe debt. Besides creditors using this tool, the IRS can use a bank levy to reclaim back taxes.
A wage garnishment is when an employer of an employee that owes debt is required to remove a certain percentage of their income and send it either to the court or the creditor to pay off debt. Usually in order for a wage garnishment to be enacted, a judgment lien must first be made by the creditor against the debtor. Obviously, a wage garnishment can be very embarrassing to an employee. Usually the percentage of income that is removed each pay check is about 10%, however this can vary by state.
A court repayment plan is when the court creates a payment plan with the debtor in order to repay a debt. Before this can take place, a judgment usually must be filed against the debtor by the creditor. In most cases, a court repayment has specific terms such as the payment period can not extend over a three year period. So for those that owe for example $3,600 to a creditor, the court would create a plan in which the debtor makes a payment of $100 each month for the next 36 months.
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