Stale Money Judgments: How Statutes of Limitation Impact Enforcement
Enforcing a money judgment amounts to collecting what is owed. In most cases, the amount includes the court’s original monetary award plus interest and fees. It is expected that judgment creditors will begin enforcement efforts as soon as legally allowed to do so. If those efforts are not begun or they are allowed to lapse, a judgment may go stale.
A ‘stale’ judgment can be defined in one of two ways depending on state law:
- Dormancy – Some states recognize dormancy, a condition under which a legal judgment still exists but the creditor has allowed collection efforts to lapse for some time. Dormant judgments can be revived.
- Exploration – Other states do not recognize the dormancy scenario. In such states, a stale judgment is one that has reached its statute of limitations and subsequently expired.
The hard truth about expired judgments is that they can no longer be collected. The states allow creditors to renew judgments prior to expiration, so that much is good. But once a judgment has effectively expired, it is no longer enforceable.
States Have Different Statutes of Limitation
A state’s statute of limitations plays into the idea of a stale judgment because it tells a judgment creditor how much time he has to collect. Each state sets its own statute of limitations. The average is 7-10 years. However, a few states have statutes of limitation as low as five years, while others go as high as twenty.
Utah’s statute of limitations is 8 years, according to Salt Lake City’s Judgment Collectors. The agency says that judgment creditors choosing DIY collection need to be aware of the statute of limitations for the simple fact that time passes a lot more quickly than people expect.
Pursuing a money judgment often requires additional legal action. Every legal maneuver has a built-in time element. In addition, creditors usually need to invest time in tracking down debtor income streams and assets. They might even have to track down the debtor himself, after he skips town and doesn’t leave forwarding information.
All of this takes time. For an inexperienced debt collector, the 8 years allowed under Utah’s statute could evaporate very quickly. So being cognizant of both the statute and its associated timeline is crucial.
Allowing a Judgment to Go Dormant
Like statutes of limitation, dormancy periods vary from one state to the next. Let us say your state’s dormancy period is one year. If you cease to make any tangible efforts to collect within a given 12-month span, your judgment will automatically go dormant. Now it’s considered stale. What can you do?
You can revive the judgment by filing the appropriate paperwork with the original court. Some states that recognize dormancy will tack the period of inactivity onto the end of the judgment, thereby effectively extending its life. Other states will not.
Why Judgments Go Dormant
As for why judgments go dormant, there are lots of reasons. For example, a debtor might be judgment-proof at the start of the collection process. There is no point in trying to collect as long as he has no income or assets. But if things change in the future, the creditor may wish to revive.
Another example involves a debtor who ends up being incarcerated. During the period of incarceration, collecting from him will be difficult. So the creditor chooses to wait until he is released.
The reality is that money judgments often go stale. Whether that means a judgment is dormant or has been allowed to expire makes a difference. Dormant judgments can be revived. Expired judgments are no longer enforceable.