Significance

• Lenders often sell deficiency judgments to debt collectors. The debt collector then becomes the legal owner of that debt. A deficiency judgment gives the debt collector a great deal of leverage. With a judgment, the debt collector can seize funds in your checking or savings account, place a lien on any property that you own or garnish wages from your place of employment, depending upon the laws of your particular state.
  
  

Credit Report

• Under the Fair Credit Reporting Act, a collection agency has a permissible purpose to view your credit report as part of the debt-collection process. The collection agency can place a collection account on your credit report. This account can remain there for up to seven years from the date the judgment is issued. If the debt collector decides to sell the debt to another collection agency, that agency can also place a collection account on your credit report if it is still within the initial seven-year time period.
  
  

Consequences

• A judgment can have serious legal consequences. Not only does it appear on your credit report as a public record and damage your credit, the owner of that judgment can pursue collection efforts against you for several years. Each state has its own statute of limitations on how long a judgment owner can legally pursue payment of a judgment. This time frame varies from one state to the other. In Washington, D.C., the statute of limitations is three years but in Alabama it's 20 years.
  
  

Warning

• The extended statute of limitations some states have when it comes to judgments can impact your life well into the future. Many consumers who experience a foreclosure may be judgment proof at the time of the judgment. This means that the debtor does not own any significant assets for the judgment owner to go after. That may not be the case years later, however. If you don't pay the judgment now, the judgment owner can wait until you do have seizable assets and lay claim to them at a future date.