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In a NutshellIf a creditor sues you to collect on an unpaid debt and wins, they'll get a court judgment against you. This court order allows them to collect on the debt by seizing your real or personal property (or putting a lien on it), garnishing your wages, or levying your bank account. Personal property includes everything from household goods to vehicles. Real property includes things like your home or land. Though creditors can legally seize real and personal property that isn’t covered by an exemption, this isn't common because it can be costly for creditors. It's more common for creditors to use wage garnishment or a bank account levy.
After not getting paid for a while, creditors will eventually file a lawsuit to try and collect the balance you owe. If the creditor wins the lawsuit (or you ignore it) they’ll get a judgment. A judgment is a court order that gives the creditor the right to seize or take certain property from you to satisfy the judgment. If you’re wondering what kinds of personal property may be at risk, this article is for you.
Once a creditor has a judgment, they have additional ways of getting you to pay them, including:
State law determines how long the judgment remains valid and enforceable.
A judgment creditor is someone you owe money to that sued you for nonpayment and won a court judgment against you. At this point, you’re called a judgment debtor. The court order may also be called a money judgment.
A debt collection lawsuit starts when you’re served with a summons and complaint. The summons tells you how long you have to respond, and the complaint outlines the reason for the lawsuit.
The amount of time you have to answer the summons is determined by the law in the state where the lawsuit is filed. It’s important not to lose track of that. If you don’t file an answer, the court will eventually enter a default judgment against you.
Even though the judgment is a court order, the judgment creditor still has to follow state laws when it comes to enforcing it. Judgment creditors can only seize property that isn’t protected by an exemption. This includes real property and personal property.
Real property refers to houses, land, and other types of real estate. Personal property is everything else — as long as you can touch it. Examples of personal property include household goods, furniture, cars, health aids, clothing, and musical instruments. Some assets don’t fall into either category, such as your life insurance, retirement plan, and IRA.
Exemptions apply to both personal and real property. The homestead exemption protects real property that’s used as a primary residence. That means a judgment creditor can’t seize or sell your home if it’s fully covered by the homestead exemption available to you.
With respect to personal property, most states have specific exemptions for specific types of property. Most protect typical household goods, health aids, clothing, and a motor vehicle up to a certain value. Federal law protects Social Security and disability benefits from debt collectors (with or without a judgment).
Exemptions also limit the amount of money that a judgment creditor can take under a wage garnishment. This is important, especially for minimum wage workers.