Judgment

What Is a Judgment?

Judgment is a court decision, spelled out in a court order, that adjudicates a dispute between two parties by determining the rights and obligations of each party. A judgment may require monetary compensation or transfer of property from one party to another. Judgments can also have non-monetary requirements, such as instructing one party to perform a service for the other.

Key Takeaways

  • Judgment is a court decision that settles a dispute between two parties by determining the rights and obligations of each party.
  • Judgments are classified as in personam, in rem, or quasi in rem.
  • Judgments are usually monetary, but can also be non-monetary, and are legally enforceable.
  • Whereas civil judgments adjudicate disputes between private individuals, a criminal judgment is the result of legal action by the government for breaking criminal laws.
  • Creditors can collect a monetary judgment by seizing the money or property of a debtor.

Understanding a Judgment

Judgments are classified as:

  • In personam is the most common type of judgment that holds one entity personally liable to another.
  • In rem imposes a general liability over a thing, such as property, but no personal liability.
  • Quasi in rem determines the rights of an individual, rather than all parties, in a particular thing, such as property.

Judgments are usually monetary, but can also be non-monetary.

  • Monetary judgment: If someone has been harmed in some way, they will seek to resolve the dispute in court and collect damages by filing a lawsuit. The resulting court judgment orders the loser of that lawsuit to pay the winner a specified sum of money.
  • Non-monetary judgment: A contractor may be forced to complete a job rather than settle the dispute by paying money.

Special Considerations

Most of the time, a judgment will be for a sum of money because money is the most appropriate form of compensation for the harm. A judgment, paid or unpaid, will remain on the debtor's credit report for seven years, but it will have a worse effect on their credit score if it is unpaid.

For the winner of a lawsuit, a court judgment is only the first step in getting the money they are owed. Actually collecting the money from the debtor can be a long, arduous, and not always successful, process. However, judgments are legally enforceable. So, if the debtor does not voluntarily pay the judgment, the creditor can take steps such as conducting a debtor's examination, seizing bank accounts, putting a lien on the debtor's property, or hiring a debt collector.

Winning a court judgment may be only the first step to collecting a debt obligation. While judgments are legally binding, collecting payments is an expensive and often fruitless process.

Example of a Judgment

For example, if a borrower does not repay a loan or a credit card debt, the lender or creditor can obtain a judgment to force the borrower to pay. As another example, a landlord who evicted a tenant for not paying the rent might file a lawsuit to collect the unpaid rent, and if the landlord won the lawsuit, it would result in a judgment against the tenant.

In a regulatory context, many corporate defendants seek to reach a negotiated settlement rather than risk a costly and unpredictable litigation process. When Wells Fargo employees were discovered to have defrauded millions of customers to improve their own performance metrics, the bank ultimately agreed to pay $3 billion in fines in order to resolve their civil and criminal liabilities. They were also forced to enhance their compliance measures and eliminate senior managers who had been overlooked the scale of the fraud.

The scandal, which first came to light in 2016, was a severe blow to the bank's floundering reputation and an even bigger blow to its share price. Although Wells Fargo stock rose with the rest of the market over the following five years, the bank continued to pay out civil penalties, with shares tumbling with each new enforcement action. In addition to regulatory actions, the bank is also facing litigation from investors who believe that they were defrauded by Wells Fargo's management.

While creditors can seize property in the collection of a judgment, most states offer exemptions for certain types of property, such as a primary home or personal vehicle.

Civil Judgments vs. Criminal Judgments

Courts in the United States distinguish between two different types of actions: civil and criminal. Civil actions represent disputes between two individuals or organizations. For example, a customer may seek a civil judgment against a company for a breached contract, or two neighbors may seek legal remedies in a property dispute. These types of judgments typically result in monetary compensation to the injured party, but they may also involve additional fines or penalties.

In comparison, a criminal judgment seeks punishment for violations of criminal law, such as theft or fraud. Whereas civil cases are usually between private individuals, criminal cases are launched by attorneys representing the government itself. In addition to monetary fines and penalties, criminal judgments may also entail imprisonment or loss of certain legal rights or privileges.

The Bottom Line

Court judgments play an important role in the market economy. In civil courts, judgments are used to enforce contracts and protect property rights. In more serious cases, judgments may also mete punishments for criminal violations, such as theft, fraud, or violence.

What Is a Summary Judgment?

A summary judgment is a judgment made by a court or judge without conducting a full trial. Either party in a legal dispute may move for summary judgment, provided that there is no disagreement about the material facts of the case. This allows both litigants to avoid the expense of a full trial. However, if a party moves for summary judgment, the judge will always examine the facts in the light most favorable to their opponent. For this reason, most parties to a lawsuit will avoid summary judgment unless they believe that the law is firmly on their side.

How Can You Avoid Paying a Judgment?

While a judgment should not be ignored, there are ways to protect some property from being collected. Most state laws offer exemptions that protect certain types of property, such as a primary home or vehicle, as long as the value of that property is below a certain limit.

In addition, some types of personal property can be protected under a chapter 7 bankruptcy, allowing debtors to discharge their obligations without giving up their basic property.

What Is a Default Judgment?

A default judgment is a ruling by a court or a judge that strongly favors one party in a lawsuit, due to a failure by the opposing party. Usually, this occurs when one party fails to appear in court, or misses a deadline to present their argument. With rare exceptions, default judgments are fully binding and are extremely difficult to reverse.

What Personal Property Can Be Seized in a Judgment?

When collecting a judgment, creditors can try to seize any property that is not exempt under state laws. This can include real property, vehicles, bank accounts, securities, wages, or even future claims on property. However, state laws often allow you to keep some property up until a certain amount, and debtors may be able to protect any property if its loss would cause them undue hardship. In addition, most creditors will generally not pursue tangible personal property, such as jewelry or clothing, unless it is especially valuable.

What Is a Judgment Lien?

A judgment lien is a court ruling that allows one party to take possession of another's property, usually in satisfaction of a debt or similar obligation. A judgment lien allows the creditor to take over the debtors' real or personal property, such as houses, vehicles, or other personal property.

Article Sources

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  1. Justice.gov. "Wells Fargo Agrees to Pay $3 Billion to Resolve Criminal and Civil Investigations into Sales Practices Involving the Opening of Millions of Accounts without Customer Authorization." Accessed Dec. 31, 2021.

  2. Barron's. "Wells Fargo Is Still in the Penalty Box. The Stock Is Dropping." Accessed Dec. 31, 2021.

  3. CNBC. "Wells Fargo Must Face Shareholder Lawsuit Alleging Compliance Failures." Accessed Dec. 31, 2021.

  4. Legal Information Institute. "Summary Judgement." Accessed Dec. 31, 2021.

  5. Nolo.com. "Using Exemptions to Protect Property from Judgement Creditors." Accessed Dec. 31, 2021.

  6. Legal Information Institute. "Default Judgement." Accessed Dec. 31, 2021.

  7. Nolo.com. "Property Subject to Collection." Accessed Dec. 31, 2021.

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