Civil Judgment

A civil judgment is a court's final determination that one party is liable to another, and in a debt case it is an order that a stated sum be paid. The Fair Credit Reporting Act uses the phrase directly: 15 USC 1681c(a)(2) restricts reporting of "Civil suits, civil judgments, and records of arrest". The narrower term of art for the money award itself is a money judgment, which is the phrase 28 USC 1961(a) uses when it provides that "Interest shall be allowed on any money judgment in a civil case recovered in a district court."

The judgment is not the collection. It is the object that makes collection possible. Published material on unsecured debt explains why a creditor with no collateral has to sue first: without a judgment there is nothing to garnish wages under, nothing to attach a bank account with, and nothing to record against property. What the creditor may then do, how long the judgment lasts, whether it can be renewed and what property is exempt are almost entirely questions of the law of the state where the judgment was entered.

How judgments in debt cases are actually entered. A creditor files suit, the defendant is served, and the defendant answers or does not. If no response is filed within the time the court's rules allow, the court may enter a default judgment: an award granted because the claim went uncontested rather than because a court weighed the evidence. A default judgment is a judgment. It supports the same enforcement tools, appears on the same records, and accrues interest the same way. Courts generally allow a defendant to move to set aside, or vacate, a default judgment, but the grounds and the deadlines are set by each court's own rules, and the window is usually short.

The federal protection nobody is told about, and it works without being asked for. 31 CFR part 212 governs what a bank must do when a garnishment order arrives on an account that has been receiving certain federal benefits by direct deposit. Its scope, at § 212.2(b), is benefit payments from the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board and the Office of Personnel Management. The mechanics are these:

On being served, the bank must first examine the order for a Notice of Right to Garnish Federal Benefits (§ 212.4(a)). If one is attached, the bank follows its ordinary procedures and this protection does not apply. If none is attached, the bank must "perform an account review" no later than two business days after receiving the order and enough information to identify the account holder (§ 212.5(a)).

The review looks back over a lookback period, defined at § 212.3 as "the two month period that begins on the date preceding the date of account review and ends on the corresponding date of the month two months earlier". If a benefit payment posted in that window, the bank calculates a protected amount, defined as the lesser of the benefit payments posted during the lookback period and the balance in the account when the review is performed.

What the bank then does with that figure is the part that matters. Under § 212.6(a) it "shall ensure that the account holder has full and customary access to the protected amount, which the financial institution shall not freeze", and "An account holder shall have no requirement to assert any right of garnishment exemption prior to accessing the protected amount in the account." Section 212.6(c) adds that the protected amount "shall be conclusively considered to be exempt from garnishment under law." The review is performed "without consideration for any other attributes of the account or the garnishment order" (§ 212.5(d)), which expressly includes "The presence of other funds, from whatever source, that may be commingled in the account", a co-owner on the account, and the nature of the underlying debt. Section 212.6(f) and (g) make the review a one-time exercise and bar the bank from garnishing later deposits under the same order. Section 212.6(h) bars any garnishment fee against the protected amount.

Two limits the reader has to know, or the protection is overstated. First, "benefit payment" is defined at § 212.3 as a payment "paid by direct deposit to an account with the character 'XX' encoded in positions 54 and 55 of the Company Entry Description field" of the deposit entry. A benefit check deposited by hand does not carry that marker, so it is not automatically protected by this rule. Second, funds above the protected amount are handled under the bank's ordinary procedures (§ 212.6(d)), so anything beyond two months of benefits still requires the account holder to assert whatever exemption their state provides.

A judgment earns interest, and in federal court the rate is a formula rather than a number. 28 USC 1961(a) provides that interest on a money judgment in a district court runs "from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding" the date of the judgment. Subsection (b) requires it to be "computed daily to the date of payment" and "compounded annually." That rate moves with the Treasury market, so no figure is printed here. State courts set their own post-judgment rates by statute, and those differ sharply. And 1961(c)(1) carves out internal revenue tax cases, routing them to the underpayment or overpayment rate under Internal Revenue Code section 6621 instead.

The credit-reporting clock for a judgment has no fixed end, and the reason is in the statute's wording. 15 USC 1681c(a)(2) restricts reporting of civil judgments that "from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period." That final clause is the departure from the seven-year pattern: where a state's limitations period for enforcing a judgment is longer, the longer period governs. Other items have fixed ceilings, including the ten years 1681c(a)(1) allows for a bankruptcy, and a charged-off account is handled under (a)(4) with the start-date rule at (c)(1). Published material on credit reports carries the full table.

What the statute permits and what the bureaus do have diverged. Published material on tax liens records the Consumer Financial Protection Bureau's finding that the three nationwide consumer reporting agencies removed civil public records under the National Consumer Assistance Plan, so that bankruptcies became the only public record on their reports. A civil judgment can still be lawfully reported for longer than seven years, and it can still be sold to lenders by other reporting agencies and found as a public record at the courthouse. It is the nationwide bureaus' own reports it has largely left.

What the creditor can do with the judgment, in outline. The standard post-judgment tools are wage garnishment, attaching funds in a bank account, and recording the judgment so that it becomes a lien on real property the debtor owns in that county. Published material covers each: wage garnishment has its own page and its own procedure, federal law caps ordinary wage garnishment at the lesser of 25 percent of disposable earnings or the amount above thirty times the federal minimum hourly wage, and liens have their own page. How long the judgment remains enforceable, whether it can be renewed before it lapses, and which property is exempt from execution are state-law questions with genuinely different answers from state to state, and this page does not give a national figure for any of them.

A creditor sues, wins or obtains a default, and the court enters a judgment for a stated amount. The creditor then uses whatever post-judgment tools the state provides. If a bank account is targeted and the account has been receiving federal benefits by direct deposit, the bank runs the account review that 31 CFR part 212 requires before it freezes anything.

A hypothetical account review. Ada receives $1,850 a month in Social Security by direct deposit. A garnishment order reaches her bank, with no Notice of Right to Garnish Federal Benefits attached, and the bank performs its account review on March 12. The lookback period is the two-month window ending in January, and two monthly benefit payments posted during it: $1,850 plus $1,850, or $3,700. The balance in the account on the review date is $4,200.

The protected amount is the lesser of those two figures, so $3,700. Ada keeps full access to $3,700, she does not have to file anything or claim an exemption to get it, and the bank may not charge a garnishment fee against it. The remaining $500 is handled under the bank's ordinary procedures, which means it can be frozen, and getting it back depends on whatever exemption Ada's state provides and on her asserting it.

Note what the calculation ignored. It did not matter that Ada's daughter is a co-owner of the account, that some of the balance came from a tax refund, or what the judgment was for. Section 212.5(d) directs the bank to perform the review without regard to any of that.

What a judgment gives the creditor

• It converts a contested claim into an enforceable award, which is the only route an unsecured creditor has to a debtor's wages, bank account or property.
• It accrues post-judgment interest from the date of entry, so the amount owed grows while collection proceeds.
• It can generally be recorded so as to become a lien on real property in that jurisdiction, which can be satisfied years later out of a sale.
• It is enforceable for a period fixed by state law and, where that state's law provides for renewal, renewable before it lapses.

What the debtor still has

• Federal benefits paid by direct deposit are protected in a bank account automatically, up to two months' worth, with no requirement to claim an exemption first.
• Federal law caps ordinary wage garnishment, and state exemption statutes protect categories of property from execution, though the lists differ by state.
• A default judgment can generally be challenged by a motion to vacate, on grounds and within deadlines the court's own rules set.
• Filing bankruptcy triggers an automatic stay that halts collection while the case proceeds, and can discharge the underlying personal liability.
• A judgment does not create money. A debtor with no attachable income or property is sometimes described as judgment-proof, which is a practical condition rather than a legal status and can change.