Default Judgments: Can I Qualify For A Mortgage?

A judgment is the worst derogatory item you can have besides a bankruptcy or tax liens.  I will affect you in getting a mortgage loan but I have helped many mortgage loan borrowers with outstanding judgments get a mortgage loan approval.  Most mortgage lenders will not approve a residential mortgage loan to a borrower with a outstanding judgment unless the judgment has been paid off but there are a few mortgage lenders that will grant a mortgage loan approval if the judgment debtor has entered into a payment agreement with the judgment creditor and has made at least two months of timely payments.  Two months of cancelled checks need to be provided to the mortgage lender in order for them to consider a mortgage loan approval.

Judgments: Clearing A Default Judgment

If you are delinquent on your payments to a creditor and the creditor feels like you have assets, the creditor can pursue further collection efforts by suing you in a court of law and getting a judge to issue a default judgment against you.  Most creditors will charge you off and sell your bad debt to a collection agency and most likely forget about it after numerous collection efforts but there are creditors and collection agencies that will go that extra mile and try to collect on your bad debt if they feel like you have assets and good income.   The first step a creditor does is to file a lawsuit in court and you need to get served by the county sheriff or process server summoning you to court.  More than 90% of those who get served do not show up to court and the judge then enters a default judgment against you.

There are three things you can do to clear your default judgment.  You can request a court hearing to contest the judgment by claiming you were not properly served.  You can negotiate with the judgment creditor for an amount less than the face value of the judgment and get a judgment release.  You can file bankruptcy and have the judgment wiped away and have no more financial obligations.  A bankruptcy is a creditor’s worst nightmare.

Bankruptcy: Clears Judgments

We will cover the topic of filing bankruptcy on a different blog, but many folks that have multiple judgments and get their bank accounts and/or wages garnished by judgment creditors should seriously think about filing bankruptcy.  I am not an attorney nor am I a bankruptcy expert, but those who do not have much assets but are struggling more so because judgment creditors are garnishing their wages or are on the verge of getting their bank accounts frozen need to seriously consult a bankruptcy attorney.  A bankruptcy is a get out of debt card and you can only use it once every 10 years so if you have just one little judgment, maybe the best thing to do is make payment arrangements.  If you have multiple high dollar amount default judgments, bankruptcy may be your best alternative.

Judgments: How Long Do Judgments Remain On My Credit Report?

Judgments will remain on your credit report for a period of 7 years but the judgment is normally good for 10 years in most states and the judgment creditor has the option of renewing the judgment after 10 years for another 10 years.  Most states have a 10 year statute of limitations on judgments but if a judgment creditor feels that you could potentially make money in the future, they can renew it for an additional 10 years.  Majority of the judgment creditors do not renew the original judgment.  If they do not renew after 10 years, you are now free and clear of the judgment and the judgment creditor cannot come after you.

Judgment Proof: What Is Being Judgment Proof?

If you have several default judgments entered against you but you have no assets or limited income, you are considered judgment proof.  If you have no money or assets that a judgment creditor can go after, they are out of luck.  Having a default judgment is not a crime and a judgment creditor cannot go after something you do not have.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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