Definition
A judgment debtor is a person or entity who has been ordered by a court judgment to pay a specific sum of money to another party, typically known as the judgment creditor. This court judgment typically arises from a lawsuit, and it legally confirms that the debtor owes the creditor a certain amount of money.
Examples
Example 1: Personal Loan Default
John borrows $10,000 from his friend Mike and signs a promissory note agreeing to repay the loan within one year. After the year passes, John fails to return the money. Mike decides to sue John. The court rules in Mike’s favor, and John is now the judgment debtor, required by law to pay $10,000 plus any legal fees incurred during the lawsuit.
Example 2: Business Dispute
A business, XYZ Corp, contracts with another company, ABC Ltd, for services worth $50,000. However, XYZ Corp fails to pay the full amount. ABC Ltd sues XYZ Corp and wins the case, making XYZ Corp the judgment debtor and legally bound to pay the outstanding balance.
Frequently Asked Questions
What happens if a judgment debtor doesn’t pay the court-ordered amount?
If a judgment debtor fails to pay the ordered amount, the judgment creditor can take various enforcement actions, such as wage garnishment, placing a lien on the debtor’s property, or seizing assets.
Can a judgment debtor negotiate a payment plan?
Yes, a judgment debtor can negotiate a payment plan with the judgment creditor. The creditor may agree to receive payments in installments if both parties consent to the new arrangement.
Can a judgment debtor appeal the court’s decision?
Yes, a judgment debtor typically has the right to appeal a court’s decision if they believe there were legal errors during the trial. However, the appeal must be filed within a specific timeframe and through proper legal channels.
How long does a judgment creditor have to collect the debt?
The timeframe for collecting a judgment debt varies by jurisdiction. In some places, it may be 10 years or more, and the creditor might also renew the judgment to extend the collection period.
How can a judgment debtor improve their credit score after a court judgment?
A judgment debtor can work on improving their credit score by paying off the debt, ensuring timely payments for other obligations, and possibly negotiating to have the judgment marked as “satisfied” in credit reports.
Related Terms
- Judgment Creditor: The party in whose favor the court renders a money judgment, indicating that they are owed a certain sum by the judgment debtor.
- Wage Garnishment: A legal procedure where a portion of a debtor’s earnings is withheld by an employer for the payment of the court-ordered debt.
- Lien: A legal claim against a debtor’s property as security for the debt owed to a creditor.
- Default Judgment: A judgment issued by the court in favor of the plaintiff when the defendant fails to respond or appear in court.
- Debt Collection: The process of pursuing payments of debts owed by individuals or businesses.
Online References
- Nolo: Judgment Debtor Information
- FindLaw: Judgment Debtors and Debt Collection
- Consumer Financial Protection Bureau: Court Judgments and Collecting Debts
Suggested Books for Further Studies
- “The Debt Collector’s Handbook: Collecting Debts, Finding Assets, Enforcing Judgments & Stopping Fraud” by David J. Cook
- “Creditors’ Rights: A Comprehensive Guide to Legal Debt Collection in the Real World” by David Scheinbart
- “Fair Debt Collection: How to Use the Federal Law to Protect Your Rights” by Robert J. Hobbs and Carolyn L. Carter
Accounting Basics: “Judgment Debtor” Fundamentals Quiz
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