How to clear a judgment from your records
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
I repaid an account that had been sent to a collection
agency. The agency placed a judgment against me. After I paid it off, I tried to get the judgment removed,
but the agency must be out of business, because I can no longer locate them. I
have all my receipts. Do I have any options? -- Janice
You have two issues with this judgment. First, you need to
have the judgment legally removed. This is also referred to as vacating,
canceling or rescinding an order of judgment.
"The fact that the collection agency has gone out of
business does not change the fact that a debt is owed to the company that the
collection agency was working for," says bankruptcy attorney John Hargrave
of Barrington, N.J.
You can have the judgment removed in one of two ways,
according to Hargrave. You can determine who the plaintiff was in the lawsuit
against you. The plaintiff was probably not the collection agency. Your
judgment paperwork should tell you the name of the plaintiff, who you can
contact and ask to provide you with proof the judgment was paid and a
cancellation of the judgment.
Alternatively, you can do a judgment search on yourself. There has to be a judgment of record. This
will likely show the name of the law firm that filed the lawsuit on behalf of
the creditor. In this way, you learn their name and now know someone who has the
authority to remove the judgment if you prove that it was paid.
You can use an Internet search
company, such as charlesjones.com, to do a judgment search.
"If neither of those approaches is successful, then you
will need to hire a lawyer to solve the problem," says Hargrave. "My
recommendation would be to file a motion in the court where they obtained the
judgment asking the court to enter an order canceling it based upon the full
Contact the firm and provide them with proof of
payment and a request that they cancel the judgments.
Your second step is to make sure your credit report is not
damaged more than necessary. You should not be stuck with an unpaid judgment on your
credit report just because the company that put it there is out of business.
In fact, due to the Fair Credit Reporting Act, the fact that
the company is no longer able to respond may work in your favor. You may be
able to not only have the judgment reported as paid, but the judgment may be
removed from your report altogether.
When a person disputes a debt by writing to a credit bureau,
the credit bureau must follow certain procedures. By law, the credit bureau
must remove the item from your credit report and then send a report to the
creditor, giving it a certain amount of time to verify the legitimacy of the
information. "Assuming the
collection agency is out of business, then it is likely no one will respond to
the request for verification," says Hargrave. "In that case, the
disputed item does not go back onto the credit report."
If, due to various roadblocks, you are not successful in having the
negative mark removed because of nonresponse from the collection agency, the
paid debt will generally stay on your report for seven years. However, a paid
debt is far less damaging than an unpaid one, and it becomes less of an issue
every year that goes by.
See related: Can debt judgments follow you overseas?
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Published: March 29, 2013