Creditors & Outstanding Judgments

Obtaining a favorable judgment at the end of a contentious lawsuit marks an important milestone in the creditor’s journey to recovery. However, the journey does not end there. Judgments still need to be collected or enforced, and every state imposes a finite amount of time for the creditor to do so. In many states, a money judgment typically lasts for 10 years, whereas others allow a much shorter timeframe to act.

All is not lost, however, if the creditor finds itself facing down an impending expiration date for its judgment. In this article, we will explore the top reasons for renewing judgments, and how they enable the judgment creditor to maximize recovery.

Protecting Investment
The process of obtaining a judgment requires a significant investment of time, money, and effort in pursuing a legal case. For business owners, it frequently entails diverting valuable human and physical capital that may otherwise be put to more productive use in making the business more profitable. Letting a judgment expire without renewing puts your investment to waste. Taking time and care to properly renew helps protect the value of those investments spent to procure the initial legal victory.

Interest Accumulation
In many jurisdictions, judgments also include interest that starts accruing from when the lawsuit commences (pre-judgment interest) and when judgment issues (post-judgment interest). Additionally, post-judgment interest provided by statute are frequently calculated based on lending rates that fluctuate over time. By renewing the judgment, the debtor remains liable for the interest amounts that have already accrued, which can significantly increase the overall debt owed.

Keeping the Debtor Accountable
Renewing a judgment serves as a reminder to the debtor that the debt remains outstanding. Debtors are generally required to be notified of creditor’s intent to renew its judgment. It can motivate the debtor to work towards repaying the judgment amount knowing that the judgment will remain enforceable for many more years to come. It can also deter those debtors who try to game the collection process in the hope that the judgment will expire before taking interest in valuable assets. By timely renewing the judgment, the creditor can thwart such evasive strategies.

Flexible Enforcement
Although a few states limit the number of times a creditor may renew its judgment, all states allow a creditor at least one opportunity to enlarge the window of opportunity for recovery. This may be particularly important where the debtor initially lacked valuable assets to be executed upon due to age, lack of employment or other personal factors. A larger time horizon may therefore increase the probability of recovery when the debtor does eventually come into possession of valuable assets that may be levied against.

Protecting Property Liens
An unexpired judgment is also necessary to maintain a continuing lien or security interest against the debtor’s real and/or personal property. Indeed, in many states, a properly executed judgment renewal will also keep the corresponding lien in place. As the priority among different liens attached to the same property will often depend on which liens record first, taking steps to timely renew is a simple step to ensure the creditor preserves its place in the priority queue to get paid.

In sum, renewing a judgment is vital to protecting the creditor’s substantial investments in earning its initial legal victory and allowing the creditor to stay vigilant in the process of collecting on the judgment. While these benefits apply across the board, achieving them requires careful execution of a custom-tailored strategy that takes into account the applicable state law deadlines, the nature of the judgment, the available methods of renewal, among other case-specific factors. As illustrated in the State-by State-Survey below, state law governing judgment renewals are quite varied in defining the finite life of a judgment. Therefore, it is essential for creditors wishing to maximize their financial interest to seek out counsels who are experienced in the nuances and complexities of the judgment renewal process.

Disclaimer: The above information is intended for information purposes alone and is not intended as legal advice. Please consult with counsel before taking any steps in reliance on any of the information contained herein.