UPDATED: December 03, 2022

When you receive a judgement from the court in relation to a debt collection lawsuit, you might think that you do not have any choice but to follow the judgement. Many people also have this misguided belief that the creditor can strip them of everything they own, just like what happens in the movies. There are certain exemptions depending on the state where the judgement is filed.

If you’re wondering whether there are ways on how to get out of paying a judgement, the answer is – YES. There are measures that you can do in case you are unable to pay the amount that was awarded to the creditor.

This article will explore the different courses of action available to you if you want to know how to get out of paying a judgement.

How To Not Pay A Judgement

In a debt collection lawsuit, a “judgement” refers to the final decision which is issued by the court. This decision will be entered into the public record and the winning party can use this judgement as a legal tool to collect the debt you owe.

If a creditor files a complaint in the court and wins a judgement against you, this party is now referred to as the “judgement creditor”, which means that they have a legal claim to collect the money from you or the “judgement debtor”. The judgement creditor can then recoup the debt by taking your personal property (also called “attachment”), putting a lien on your house or real estate property, performing a bank levy process, or taking a portion of your salary (also known as ‘wage garnishment”).

What can you do if this happens? Here are your options after receiving a judgement against you:

  • Attempt to vacate a judgement
  • File a claim of exemption
  • File for bankruptcy to discharge the debt
  • Settle with the judgement creditor

1. Attempt to Vacate a Judgement

Vacating a judgement means asking the court to “set aside” the judgement. When the judge agrees to vacate the judgement, this will delay the judgement creditor from collecting from you because that judgement will be legally void or invalid. 

The creditor will no longer have the ability to immediately execute collection activities until after the judge issues a new judgement after a new trial date is set. However, vacating a judgement is only possible if the judgement entered against you is a “default judgement”.

What is a Default Judgement?

A default judgement is a decision issued by the court or a judge if one party fails to respond to a court-ordered action like failing to show up for the hearing or not answering the summons from the court.

If you ignore the lawsuit or if you do not answer a summons from the court within the deadline given to you, what usually happens is that the judge issues a judgement in favour of the compliant party, in this case, the creditor, and this default judgement could empower the creditor to collect money from you even if the debt may be inaccurate, not yours, or has passed the statute of limitations.

What do you need to do if a default judgement is entered against you? You can file a Notice of Motion to Vacate Judgement and Declaration. While there are online resources that could help you do this yourself, it is advisable to seek the help of a lawyer to correctly do this process.

How to Vacate a Judgement?

You have to make sure that you file the motion to vacate the judgement within the timeframe allowable. The deadline is usually 30 days from the date the court mailed you the judgement but it is best to check your local state laws.

When requesting for the judgement to be vacated, you have to present a valid reason why you were not present during the hearing.

  • Were you not aware of the complaint?
  • Did you not know that there was an ongoing case against you?
  • Was the debt not yours?
  • Did the summons get lost in the mail?
  • Were you not served properly?
  • How long after the judgement was served did you discover that there was a judgement against you?
  • Were you not able to attend the hearing because of an emergency or a medical condition?

All of these factors could affect your motion and can help you in getting the court to vacate the judgement. When you are successful in vacating a judgement, not only does this buy you time from paying what the creditor demanded, but also gives you the power to fight or renegotiate the complaint.

What Happens After the Judgement is Vacated?

Keep in mind that vacating a judgement does not mean the lawsuit was dismissed or cancelled. What it means is that you want the judge to disregard the judgement because you were not able to contest it in court. You are basically requesting the judge for a “do-over” but you have to present a valid excuse on why you should be granted another trial.

After a judgement is vacated, you have to attend the new trial and present your defences or arguments against the complaint. There are several defences that you could use like identity theft if the debt is not yours, an inaccurate debt amount if you believe that the amount is wrong, or you can also argue that the debt is old (statute of limitations).  If you are able to prove that the complaint is not valid, then the new judgement could be in your favour.

If you believe that the creditor has strong evidence against you, you can also settle the lawsuit at this point. This is your opportunity to negotiate a lower payment amount because when you contest the case, it is much more likely that the settlement will be favourable to you.

2. File a Claim of Exemption

In numerous Hollywood movies, like in The Wolf of Wall Street, we often see scenes where creditors seize away the character’s house, car, money, furniture, and other belongings. In a lot of these films, the character becomes dramatically dirt poor, which can be scary.

In real life, however, if your judgement is for credit card debt, unsecured loans, or other consumer debt, you don’t have to worry about ending up in the streets or giving up all of your wages.

There is some property and money that the judgement creditor is not allowed to take from you to pay a civil judgement. What is considered exempt will depend on the state law where the judgement is filed.

Some of the common exemptions are the following:

Federal Benefits and Support Payments

  • Social Security Benefits
  • Retirement Benefits
  • Unemployment Benefits
  • Disability Benefits​
  • Veteran's Benefits
  • Life Insurance Benefits
  • Child Support / Spousal Payments

For these benefits to be considered exempt, they have to be directly deposited by the relevant agency to your bank account. If you transfer the money yourself to a separate bank account, you would have to prove that this money came from these benefits.

Homestead and Property Exemption

You can have your primary residence exempted by listing it as your homestead to get a homestead exemption. A homestead exemption will generally provide you legal protection from unsecured creditors from removing you from your house. You have to check the Homestead Laws in your state how this works for you.

It is also possible to file exemptions on vehicles, personal possessions, and property used for trade or business but only up to a certain amount.

Wage Garnishment Exemption

In terms of your wages, the creditor can only garnish or take a portion of your salary. They cannot take all of it.  The percentage of what they can take will depend on how much your disposable earnings are. Generally, this amount cannot exceed 25% of your disposable salary but it will differ from state to state.

In some cases, it is also possible that all of your income will be exempt from garnishment if you do not earn enough or do not reach the minimum amount set by the law in your state.

How to Know if You are “Judgement Proof”?

Depending on the state where the judgement is filed, it is possible for you as a judgement debtor to be “judgement proof” or “collection proof”. What this means is that all of your income and property cannot be taken or garnished from you because they are all considered exempt. You have to consult with a lawyer to see if you qualify as a judgement proof debtor.

When you are judgement proof, it means that the creditor cannot collect from you legally. They can still continue to call you and annoy you to try and collect from you but you can ask them to stop by giving them a letter stating that you are judgement proof.

If your situation changes such as getting a higher-paying job or maybe getting an inheritance or property, your status as being judgement proof will change and depending on the judgement, it is possible for the creditor to still collect from you.

How to File a Claim of Exemption?

It is the responsibility of the creditor to collect from you, and not the courts. When you receive a judgement indicating that you have to pay up, you will receive a notice of garnishment or attachment from the judgement creditor.

You usually have 10 days from the time this notice is mailed to you to file a claim of exemption. Check your local state laws on the exact days you may have to file your claim.

Filing a claim of exemption secures the exempt income and property. This saves you the hassle of trying to recover your money or property.

Can Exempt Income and Property Still be Taken?

Even if your income or property is considered exempt, there are still certain cases when these can still be taken from you. The following situations are some examples:

  • If the judgement is for child support
  • If there is a bankruptcy order that directs that the property should be taken
  • Exemptions may not be available for certain tax liens
  • If the debt originated from the purchase, improvement or loan on that property, then it cannot be exempt. For example, if you bought a car or a house and cannot continue paying the monthly instalments, you cannot file a claim of exemption on that particular house or car.

3. File for Bankruptcy to Discharge the Debt

In 2019, there were 772,646 bankruptcies filed in the United States. While filing for bankruptcy is an extreme move, this is the only legal way for you to erase your debt and avoid paying a judgement altogether.

Consumer debts can be discharged through bankruptcy so if you’re looking for a way on how to stop a judgement for credit card debt or payday loans, this is an option that you can consider.

However, there are certain judgements like child support, criminal penalties, restitution, and fines, student loans, or debt from fraud that cannot be discharged in bankruptcy.

4. Settle with the Judgement Creditor

This last option will not completely get you out of paying a judgement. However, it could lower the amount that you need to pay. For example, instead of paying the full amount demanded by the creditor in the complaint, you can negotiate and reach a settlement that is favourable to both parties. Most creditors accept to settle for a lower amount rather than continuing to chase you to get payment.

How to Negotiate a Judgement Settlement?

When negotiating with a creditor, start at the lowest amount like 15-20% of the debt. Starting low will give you a lot of negotiating room and will obviously benefit you. As much as you can, try to get out of paying the exorbitant fees and interests that piled up over the original debt. Creditors will often accept 50% or lower of the debt amount.

If you cannot get the creditor to agree, hint that there is a possibility of you filing for bankruptcy, whether you plan to or not. This will make it easier to convince the creditor to take the amount you’re offering rather than getting zero dollars.

How to Pay Off a Judgement Against You when a Settlement is Reached?

After you agree on an amount, request for the agreement in writing and in that same document, it should be stated that once you pay off the amount, the creditor will file a ”Satisfaction of Judgement”. This is a document signed by the creditor that payment was received.

Do not pay any amount until you get a written agreement from the creditor that the amount you agree on will be the final amount, no more and no less. You do not want to find yourself six months from now getting harassed again by the same creditor saying that you did not pay enough.

Stopping Creditors From Collecting Judgement

If a judgement is entered against you, you still have ways on how to contest it if you want to delay, avoid, or settle debt collection. Depending on your individual circumstances, you can explore the options listed above to achieve this. Consulting a lawyer who is familiar with debt collection lawsuits in your state is the best recourse to know where you stand.