There’s a line in the classic movie, The Producers, when one character says to the other, I lieb you, baby. I lieb you. Now lieb me alone.
The speaker clearly wants the other person to vacate the premises immediately. Leave him alone with an empty space, so to speak.
That’s what it means to vacate a judgment – the entire thing vanishes in a puff of smoke, leaving no judgment behind. The lawsuit remains active, but the clock is turned back so that the judgment is erased.
There are two ways for a creditor to get a judgment against you. They are:
- A judge can make a ruling that the creditor has proven all aspects of a case against you; or
- A judge can make a ruling that a creditor is entitled to a judgment because you didn’t fight the lawsuit.
The first way is usually called a judgment on the merits and the second way is called a default judgment.
In both situations, it is possible to get the judgment wiped out as if it never happened.
The process of wiping out a judgment entirely is called vacating the judgment.
- What Does A Judgment Mean?
- Here’s What It Means To Have A Judgment Filed Against You – And What You Can Do About It
- Credit Card Lawsuit – Why You Should Always Fight.
- Here Are Your Options When Served With A Collection Lawsuit
- 6 Steps To Avoiding A Default Judgment
Two Ways To Vacate A Judgment
Just as there are two ways for a creditor to get a judgment against you, there are two ways to have the judgment vacated. They are:
- Appeal the judgment and have the appeals court render the original judgment void; or
- Ask the original court to vacate a default judgment so that you can fight the lawsuit.
Grounds For Vacating A Default Judgment
Each state has its own rules for vacating a default judgment filed against you. In California, for example, a judge can vacate a default judgment taken due to mistake, inadvertence, surprise, or excusable neglect.
In New York, the rule is similar. Under that state’s law, you can vacate a default if the judge believes you had a reasonable excuse for missing the original court date as well as a good defense to the lawsuit.
Both states allow the judge to set aside the judgment if you were never served with the original lawsuit papers. In addition, there are time limits involved.
Impact On Your Credit Report
Just because the judgment is vacated doesn’t mean that the lawsuit disappears. In fact, vacating the judgment means that the lawsuit is active once again.
The lawsuit will continue to show up on your credit report, though the judgment will not longer be reported to the credit reporting agencies.
If you win the lawsuit that will be reflected on your credit report. And if you lose, the new judgment will be reported.
Do This Before You Ask the Court to Set Aside the Judgment
Sometimes setting aside the judgment isn’t a good idea. If you don’t have a reasonable defense to the creditor’s claims then the judge will deny your request because it’s a stall tactic and waste of time.
A better decision might be to see if the creditor’s attorney will work out a voluntary repayment plan or lump sum settlement with you. Most attorneys are willing to listen to a reasonable proposal because it allows them to collect without having to spend the time or money involved in getting a wage garnishment order.
You should also look at the amount the creditor can get in a wage garnishment. If your income is relatively low, the garnishment may come to far less than what the creditor would demand in a voluntary repayment. Many states even have a way to prevent garnishment if your income falls below a certain level.
Don’t Let It Get That Far
If you get lawsuit papers, either file an Answer or get to a lawyer like me who defends collection actions.
Waiting for a default judgment in the hopes that you can get it vacated isn’t a very good plan of attack. After all, the judge may deny your motion – and then you’ll be sitting with a judgment against you and nobody to blame but yourself.
Learn Your Student Loan Rights (FREE)
Enter your email address to get my free 6-part Student Loan Roadmap delivered to you by email.