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What Happens After Default Judgment Issued

The Unforgiving Hammer Drops

A default judgment is the legal world’s version of strict discipline. When you fail to respond to a lawsuit; the court has no choice but to rule in favor of the plaintiff. It’s a sobering wake-up call that you ignored at your own peril.Let me paint you a picture. Imagine you’re a real estate investor like myself. You took out a hard money loan for a residential flip; but the project stalled. The lender’s attorneys did everything by the book – served you with a Summons and Complaint. But you got cocky or careless; and just didn’t respond in time. Well, partner, that defaultjudgment is about to reverberate through your life like a cannon blast.

Frozen Assets and Garnished Wages

Once that judgment is entered, it’s like someone flipped a switch. Your bank accounts? Frozen. That nice car you rewarded yourself with? The creditor can seize it to settle the debt. Oh, and say goodbye to any future wages too – the plaintiff can garnish your paycheck until that judgment is satisfied.Don’t take my word for it though. Just look at this article from Forbes which outlines how aggressive creditors can be. They’ll go scorched earth to collect on that debt. It’s like a financial colonoscopy – they’ll inspect every nook and cranny of your assets.

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The Judgment Lien Chokehold

But we’re just getting started. With a judgment in hand, the plaintiff can also file a lien against your real estate. A real estate lien is like a boa constrictor wrapping around your property’s neck. Good luck trying to sell or refinance – that lien has to be paid off first.As this Nolo article explains, judgment liens can last for years or even decades in some states. It’s a lingering cloud over your biggest assets.

Bankruptcy? Not So Fast…

Some of you might be thinking “No sweat, I’ll just declare bankruptcy.” Hold up, partner. Thanks to reforms in the 2005 bankruptcy law, that default judgment is likely surviving bankruptcy intact as a non-dischargeable debt.Don’t believe me? Check out this FindLaw overview on which debts can’t be wiped out. If that loan was for your business, forget about a bankruptcy escape hatch.

The Repo-Man Cometh

But we’re still not done piling on the consequences. With a default judgment, the plaintiff gets broad powers to repossess your personal property too. Thought that classic car collection was safe? Think again.As this Avvo article outlines, creditors can seek court orders to seize just about anything not exempted by state law. Your prized assets could be auctioned off to the highest bidder to pay that debt.

Future Finances Flushed

And let’s not overlook the long-term credit devastation. With a judgment on your record, good luck getting any loans or credit cards in the future. According to Experian, judgments can remain on your credit report for up to 7 nightmarish years – or longer in some states.Your credit score will be in the toilet. Any future financing for investments or businesses will either be denied or come with outrageous interest rates. That defaultjudgment is like a financial scarlet letter you can’t cover up.

Reputation in Ruins

But the fallout extends beyond just your pocketbook. In today’s hyper-connected world, court judgments are a virtual resume stain for your professional reputation.Just look at this Reddit thread where people discuss how a judgment could impact employment prospects. A quick Google search by a potential employer or client could instantly raise red flags about your trustworthiness and responsibility.

The Scorched Earth Scoreboard

Alright, let’s recap the carnage left in the wake of that default judgment:

  • Bank accounts frozen
  • Wages garnished
  • Property liens
  • Possessions repossessed
  • Bankruptcy roadblocked
  • Credit score annihilated
  • Reputation stained

Not exactly the American dream, is it? By failing to respond to that lawsuit, you surrendered and waved the white flag. The creditor is now the proud owner of your financial future.

The Hail Mary to Vacate

So what’s the play here? Well, you may have one last ditch “Hail Mary” option to get that default judgment vacated or set aside. But it’s an uphill battle for sure.As this overview from explains, you’ll need to file a formal motion and convince the judge that the default was the result of “mistake, inadvertence, surprise or excusable neglect.” Things like a clerical error re-routing the summons or you being hospitalized may qualify.But the bar is high, and you’ll be facing an uphill battle against the creditor’s attorneys. They’ll argue you simply made an irresponsible, unforced error by sleeping on the lawsuit. Expect them to fight this tooth and nail.

The Bitter Lesson Learned

At the end of the day, a default judgment is a devastating, potentially life-altering event. It’s the legal equivalent of getting knocked out in a heavyweight fight.The takeaway? Always, always, always respond to any lawsuit or debt claim against you or your business. Hire an attorney if needed, but never stick your head in the sand. Being proactive and resolving the issue is always the best policy.Because once that default judgment hammer drops, the financial wreckage can take years – if not decades – to dig out from. Don’t say I didn’t warn you. The courtroom showed you no mercy, because you showed no responsibility.

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