What is a default judgment?
A default judgment happens when a Plaintiff in a lawsuit requests the court to enter a judgment against a defendant because the defendant failed to answer a lawsuit. Default judgments are related to bankruptcy because many clients come to us when they receive a default judgment from one of their creditors. This means that the Creditor has attempted to collect from the client. However, being unable to do so, they filed a lawsuit against the creditor. If the client, now a defendant, fails to answer the lawsuit, the Creditor can obtain a default judgment against the defendant from the court.
What can a creditor do with a default judgment?
When a client falls behind on their debt, the creditor or collection agency will attempt to collect the debt. The collection process usually involves sending threatening phone calls and letters. In many cases, creditors will threated the client with garnishments, bank levies, and liens. However, the reality is that creditors cannot do these things without going to court. A creditor must file a lawsuit and obtain a judgment against a client in order to garnish wages, levy bank accounts, and put liens on property. Therefore, the threat to do these things are normally just threats unless a lawsuit has been filed.