Failing to pay back a debt could mean the creditor sues you, probably resulting in a judgment, and ruin your credit score. If someone sues you to obtain a judgment, you might be able to negotiate to remove it. At a bare minimum, dealing with the debt is better than letting it sit.
Vacated Judgment
Vacating a judgment means the court removes the judgment from your record because it was improperly awarded to the creditor. Judges may vacate the judgment due to a reasonable excuse for not showing up for court, such as being out of town or having an illness at the time. You can also try the meritorious excuse, or valid defense, such as being a victim of identity theft and not having liability for the debt. Receiving poor quality service is another possible defense.
Settlement
The judgment creditor might dismiss its case if you agree to pay in full. Have the creditor give you in writing an agreement to report the judgment as "dismissed" rather than "paid," because a dismissed case looks better to creditors than a paid judgment. Dismissed judgments basically say the debt is void, while paying insinuates you legally accrued the debt. Even a dismissed judgment, however, stays on a credit report for seven years.
Credit Bureau Dispute
You can dispute the judgment with the credit bureau in the hopes that it cannot verify the validity of it in 30 days. Courts can be slow about sending in the proper paperwork and if it works, you avoid the pain of a judgment on your record for free. Also, check the statute of limitations on debt in your state. If it passes, you are not legally obliged to pay the debt nor can it be reported.
Tip
You may want to settle the debt before it goes to court if you legally own it. Once a judgment hits your credit report it stays for seven years. Also, you will probably have to pay it anyway, possibly through garnishment of your wages or bank account. In some states, judgments are renewable before their expiration date, so they could theoretically haunt you forever.
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