A judgment against you is a court order saying you owe a specific debt. It gives the creditor the legal power to garnish wages, levy bank accounts, and place liens on real property until the judgment is paid or otherwise resolved. You have several options, and which one fits depends on how recent the judgment is, what assets and income you have, and whether the debt is dischargeable in bankruptcy.
Option 1: vacate the judgment if you can. If the judgment is recent (within 30 days to 1 year, varies by state) and you have a credible reason for the default (improper service, excusable neglect, fraud), file a motion to vacate. If granted, the judgment is set aside and you defend the case on the merits. This is the cleanest outcome if it's available. See our guide on how to vacate a default judgment.
Option 2: negotiate a satisfaction. Most judgment creditors will accept a reduced lump-sum payment in exchange for marking the judgment satisfied. Typical settlements run 30 to 60 percent of the judgment amount, especially if the creditor cannot identify garnishable wages or leviable assets. Always document the settlement in writing. Confirm three things: (1) the creditor will file a Satisfaction of Judgment with the court, (2) the credit bureaus will be notified, and (3) you will receive a copy of the filed satisfaction.
Option 3: claim exemptions. Many forms of income are exempt from garnishment under federal and state law. Social Security retirement and disability benefits, Veterans benefits, federal student aid, public assistance (TANF, SNAP, WIC), workers compensation, and retirement accounts are protected. If your income is entirely composed of exempt sources, you are 'judgment-proof' and the judgment cannot reach your funds even though it remains on the books. File a Claim of Exemption with the court when a garnishment or levy is filed; banks and employers must release the funds back to you.
The 2-month bank account protection. Federal banking regulations (31 C.F.R. Part 212) require banks to automatically protect the last 2 months of federal benefits (Social Security, SSI, VA, federal employee retirement) deposited to your account when they receive a garnishment order. The bank must let you keep up to 2 months of benefits in the account without freezing them. This protection is automatic; you don't need to file anything.
Option 4: file bankruptcy. Most consumer judgment debt is fully dischargeable in Chapter 7 or restructurable in Chapter 13. Filing stops garnishment and levy activity immediately through the automatic stay. The judgment lien on real property can be 'avoided' through a lien-avoidance motion under 11 U.S.C. § 522(f) if the lien impairs an exemption (almost always does on a primary residence with exempt equity). For most consumer debtors with $20,000+ in judgment debt and limited assets, bankruptcy is the most complete solution.
Judgment liens on real property. A judgment creditor can record the judgment with the county recorder's office, which creates a lien on real property you own in that county. The lien must be paid (or dealt with in bankruptcy) before you can sell or refinance the property. Recording a lien is the most common way judgment creditors preserve their claim against people without garnishable wages.
Statute of limitations on judgments. Judgments have their own statute of limitations, separate from the original debt's SOL. State limits range from 5 years (some states for some debt types) to 20 years (New York, Massachusetts), with many states landing on 10 years. Most states allow the creditor to renew the judgment before expiration, often indefinitely. Once the judgment SOL expires without renewal, the judgment is unenforceable.
Tax implications of settlement. If a creditor accepts less than the full judgment amount and forgives the difference, the forgiven amount is canceled debt income under 26 U.S.C. § 61(a)(11). The creditor must issue Form 1099-C for any cancellation of $600 or more. You may be able to exclude the income through the insolvency exclusion on Form 982 if you were insolvent at the time of settlement. Debt discharged in bankruptcy is not taxable.
Post-judgment discovery. The judgment creditor can compel you to attend a deposition or 'examination of judgment debtor' to disclose your assets and income under oath. Failing to appear can result in a contempt finding and (in some states) a bench warrant. Always attend court-ordered examinations. The information you provide can be used to identify garnishable wages and leviable assets, but lying under oath has much worse consequences than honest disclosure.
The honest summary. A judgment is serious but not the end. Acting promptly to either vacate, settle, exempt, or discharge the judgment is far better than ignoring it and waiting for garnishment to start.