If you consider yourself financially savvy, you may be aware of two different types of debts in the consumer arena: secured and unsecured debts. A good example of a secured debt is the residential mortgage. Likewise, credit card debt is a good example of unsecured debt. Where do money judgments fall?
Money judgments occupy a strange middle ground due to the nature of how collection is handled. A money judgment can start out as an unsecured debt – and most do – only to become secured later on. If you don’t know why, sit tight. This post will explain it in full detail.
A Judgment Is a Court Decision
Let us begin with the premise of a money judgment being a court decision. It is a decision reached by the court in a civil case. Consider a landlord who takes a former tenant to court over unpaid rent. If the court finds in favor of the landlord, it issues a judgment ordering the former tenant to pay back rent plus interest, fees, and legal expenses. The entire decision constitutes the judgment.
A Judgment Is Also an Asset
The interesting thing about money judgments is that they are considered assets under the law. They are assets in the same way cars, boats, and business equipment are. As such, they can be bought and sold. However, that is another topic for a different post.
As an Unsecured Debt
Right out of the gate, a money judgment is an unsecured debt. It is simply a legal order that compels the judgment debtor to pay a certain sum. There is no property securing the debt to ensure payment. This isn’t necessarily a bad thing.
As an unsecured debt, the judgment can be paid in any number of ways. The most common option is the two parties entering a voluntary payment plan. With court approval, the creditor agrees to cease all collection efforts while the debtor agrees to make monthly payments until the debt is paid.
Another option is a lump-sum payment. The debtor agrees to pay a significant amount to settle the debt, while the creditor agrees to accept less than what is owed. It is quick, clean, and efficient.
As a Secured Debt
A money judgment becomes a secured debt once the creditor takes additional legal action. Using the prior scenario, imagine a situation in which a judgment creditor attempts to work out a payment plan but without success. For whatever reason, the debtor will not agree to it.
The creditor could then take additional action. He could place a judgment lien on the debtor’s property. Doing so turns the unsecured debt into a secured debt. In other words, the judgment is now secured by the debtor’s property.
The debtor cannot sell, transfer, or otherwise dispose of the attached property without first addressing the associated debt. A buyer interested in obtaining the property could also take the lien with it, but who wants to do that?
A Debt Requiring Collection
Whether secured or unsecured, a money judgment is a debt needing collection. What so many judgment creditors do not understand going in is that courts do not get involved in collection efforts. They will grant writs of execution, writs of garnishment, and other motions, but the actual process of collection is left up to creditors and their representatives.
Judgment Collectors is a Utah collection agency specializing in money judgments. We work with clients in nearly a dozen states. If you are having trouble collecting an outstanding judgment, reach out to our team. We just might be able to help you get things squared away in a timely manner.