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Why Judgments Kill Your Credit Score

Posted by Melinda Dionne | Oct 05, 2011 | 0 Comments

What is a judgment?

A judgment occurs when a creditor takes you to court, sues you, and wins its case against you. The creditor must do this before the statute of limitations runs for the original debt. In Alabama, the statute of limitations for oral contracts, written contracts, and promissory notes is 6 years from the date of your last payment or the date the creditor sends you a demand letter, and the statute of limitations for open-ended accounts is 3 years from the date of your last payment or the date the creditor sends you a demand letter.

How long can a judgment stay on my credit report?

Accurate negative information generally can stay on your credit report for seven years. One notable exception to this general rule concerns lawsuits or judgments. Information concerning a lawsuit or judgment against you can be reported for seven years from the date of entry of the judgment or until the statute of limitations runs out, whichever is longer. In Alabama, the statute of limitations on judgments is twenty years; therefore, a judgment in Alabama can remain on your credit report for twenty years.

Why do I care about judgments?

If the creditor records the judgment in the county in which you own real estate, the judgment becomes a lien on your property.  As just mentioned, in Alabama, a judgment can remain a lien and stay on your credit report for twenty years – a long time! Behind bankruptcy, foreclosure, repossession, and loan default, court judgments are the most damaging information on a credit report. Additionally, the entry of a judgment allows a creditor to seize bank accounts, seize assets and garnish your wages. Finally, because it is easy to renew a judgment once the a diligent creditor can hound you for a very long time.

How Can Filing a Bankruptcy Case Help Me to Clear A Judgment?

When you file a bankruptcy case, you wipe out the underlying debt that gave rise to the judgment.  In addition, bankruptcy provides a means of avoiding judgment liens that impair your exemptions.  By filing a bankruptcy case, you may be able to completely wipe out the debt and the lien.

About the Author

Melinda Dionne

My name is Melinda Dionne.  For over 35 years, I have been helping people find a way to deal with overwhelming debt.  I have never represented a deadbeat because the vast majority of people having financial problems are anything but deadbeats.

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