Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Judgment

What it is:

A judgment is a court order to pay someone else a sum of money or other remedy.

How it works (Example):

Let's say John Doe owns a pit bull he hasn't trained very well. One day, John's dog jumps the fence and mauls Jane Smith's dog, Fifi. Jane rushes Fifi to the vet and incurs $2,000 in vet bills.

Jane sues John Doe for $3,000 to compensate for the vet bills and pain and suffering. The judge agrees and orders John to pay the $3,000. This order is a judgment against John, and it is usually a matter of public record. If John does not pay the judgment, Jane can ask the court for remedy, which might include the court placing a lien on his assets, garnishing his wages or other actions.

There are different kinds of judgments. A default judgment, for example, occurs in favor of the plaintiff when the defendant fails to appear in court to defend himself or does not respond to a summons. A deficiency judgment occurs when the sale of a seized piece of property does not generate enough cash to pay the judgment and the court has to place a lien on more property.

Why it Matters:

Judgments are reported to credit agencies and generally stay on a person's credit report as a negative item for seven years. Judgments aren't always monetary, though. A judge could order John to build a higher fence on his property, for example, or take the dog away.