What If I Get a Default Judgment Against Me?

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Here is a common fact pattern that happens almost every business day in America.

Creditor gets a default judgment against a debtor.  The debtor has a car already subject to a lien and receives social security and some modest income from a part-time or temporary job.  All of the debtor’s cash assets are in one account with a bank or credit union.  The debtor has no other assets.

This common occurrence raises a series of often-asked questions:

  1. Will the creditor get a lien on the car and be able to repossess and sell the car to satisfy the debt?  ANSWERBecause the car is already subject to a lien and due to the vagaries of the laws relating to creditor protection in this area, it is very unlikely that the creditor can get a valid lien on the car.  In addition, because the car is already subject to a lien, it is extremely unlikely that there is any unencumbered value for the creditor with a judgment to latch onto. 
  2. Can the debtor’s social security payments be garnished?  ANSWER:  Although social security payments may be withheld by the Department of the Treasury to enforce legal obligations (a) to pay child support, alimony and restitution; (b) overdue federal  tax debts; and (c)  certain delinquent non-tax debts owed to other federal agencies under the Debt Collection Improvement Act. the judgment creditor in our case cannot do so. 
  3. Should social security benefits be placed in a separate account that contains only social security payments and no other cash assets of the account holder?  ANSWER: Social security benefits that are commingled with other cash assets of the debtor may become subject to collection by a judgment creditor even if such benefits are otherwise not recoverable by a judgment creditor. 

If a judgment has been entered against you and you have questions about what can happen next, and how to protect yourself, drop me a line at tzink@mccarthyfingar.com

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