A debtor who loses a lawsuit must pay damages ordered by the court or face legal penalties. Creditors can recover damages by force or negotiate payment plans. Failure to pay damages can result in liens on assets and a negative credit record. Bankruptcy is a last resort.
A debtor is a person who has lost a lawsuit and is sentenced to pay damages. As soon as the court has ruled on the case, the debtor becomes liable for the damages ordered by the court. Failure to pay damages may result in legal penalties. Historically, debtors could potentially be jailed for non-compliance with judgments, and while this practice no longer occurs today, creditors are allowed to take a variety of steps to recover the money they own.
The person who wins the case is known as the judgment obligee. Once the damages have been acknowledged to the creditor, he has the right to recover them and, if the debtor does not pay them, the creditor can initiate proceedings to take them by force. The court may assist in this process, depending on the situation, and if there are multiple creditors, the court may step in to determine who is first in line and to ensure that people recover as much as possible.
Once damages are awarded, the best course of action is to pay them as quickly as possible. If a debtor is unable to pay the damages in full, he or she can approach the creditor about options, such as payment by installments. Taking the initiative and indicating a willingness to pay in good faith can help people avoid legal penalties. Many creditors are willing to negotiate payment plans with people who are honest about their inability to pay and who develop a proposed payment plan that seems reasonable and fair.
If a debtor fails to pay, the creditor can place liens on the debtor’s assets or confiscate them, depending on the situation. The judgment is also reported to the credit bureaus and the non-payment will appear as a black mark on the debtor’s record. This will make it difficult to obtain credit and can also have a negative impact on things like housing applications.
There may be instances where a debtor is simply unable to pay. Such debtors may choose to file for bankruptcy to clear their debts and start fresh. This step is generally only recommended as a last resort, because it will result in a bad credit record and can cause difficulties opening bank accounts and making financial transactions. An attorney can provide more specific advice for someone considering bankruptcy.
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