Monday, March 24, 2008

Removing Civil Judgments From Your Credit Report

If you have judgments against you on your credit report, you have two choices. Pay and get a satisfaction of judgment or dispute them with the credit bureaus.

A civil judgment is a court order for a person who owes money (judgment debtor) to pay it to another (judgment creditor). The court does not make the debtor pay the creditor. The creditor has to take action, on their own to collect the debt. They have several options.

First, if the debtor owns real-estate, they can have the judgment recorded in the counties where the real-estate is located. If the debtor tries to sell or refinance the property, a title search will show the judgment. The judgment is a lien on the real estate, just like a mortgage, and must be paid off before the property can be sold.

If the judgment is large enough, and the debtor has non-exempt equity in the property then the creditor can foreclose their lien and have the property sold to pay off the judgment. If the property is the debtor’s residence, there are special rules that apply. For instance, in the United States, a portion of the equity in the real estate is exempt from creditor’s claims. In Colorado, the first $60,000 in home equity is exempt. That means the debtor can keep the first $60,000 in equity from the sale. It works like this. If the creditor had a $100,000 judgment and the debtor owned a $425,000 house with $90,000 in equity and the house was sold at a foreclosure sale for $425,000, the creditor would get $30,000 from the sale.

Judgments can also be collected against bank accounts, and wages through garnishment.

Finally, a creditor can elect to have the county sheriff seize non-exempt personal property from the debtor and have it sold at a Sheriff’s Sale.

Unsatisfied civil judgments ( that means unpaid ones) also damage your credit score. The credit bureaus find out about judgments by searching real estate and court records. If you have paid off or settled a judgment, you must have the creditor file a Satisfaction of Judgment with both the court, and in any counties where the judgment was recorded. That way it shows that the judgment was paid, and it will not hinder any of your real-estate transactions.

If the judgment continues to appear on your credit report, after the satisfaction of judgment form(s) has/have been filed, then you can dispute the matter with the credit bureaus. Send a letter to each of the credit bureaus informing them that the judgment has been paid. Include a copy of the satisfaction of judgment from the court. The credit bureau will then have 30 days to verify this with the court, and then will have update their information to show that the judgment has been paid.

In some states, a judgment debtor’s social security number is not included in the court file. When this happens, and a judgment is recorded, a credit bureau may list the judgment as being against all debtors with the same or similar name. If the judgment is not yours, you need to follow the dispute procedure listed above and request that it be deleted from your report. In the short term, for a real-estate closing for example, you may be able to provide an affidavit stating under oath that the judgment is not against you.

If you have a common name, like “Johnson”, “Smith”, or “Martinez”, chances are that you will have judgments erroneously placed on your credit report. When I bought my first house, there were over 30 judgments listed on my report. Some were from states that I had never even visited, and others dated from before I was born. I had to supply my title insurance company and mortgage lender with an affidavit swearing that they were not my judgments.


Anonymous said...

After the 7 year SOL, I disputed a Judgment and although I included a copy of the paperwork with the date stamped, the CR reports that the court verified the information and it remains unchanged. How to I question the court to double check the date?

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