I live in California and have judgments in Oregon. Should I worry about this?
Collection agencies have judgments against me in Oregon. I've lived in California for the last nine years. Can the collection agencies garnish my wages/bank account with Oregon judgments?
A collection agent can be a representative of a creditor or may have purchased the debt account from the original creditor for a discount from the original balance.
Domestication of judgments
Article IV, Section I of the U.S. Constitution, commonly referred to as the Full Faith and Credit Clause, states "full faith and credit ought to be given in each state to the public acts, records, and judicial proceedings, of every other state..." In practice, this clause means, among other things, that all states must honor judgments issued by other states.
This means a creditor that obtains a judgment against a debtor in State A can request that the judgment be recognized in State B. This procedure is called "domesticating" a "sister-state" judgment. A sister-state judgment means a judgment issued by a court in another state of the United States. The term "sister-state" is used to distinguish between judgments issued by foreign countries (as foreign countries are also sometimes referred to as "states"). Sister-statehood has nothing to do with the states' proximity to each other. Alaska and Hawaii (for example) can be sister states for the purposes of this discussion.
Generally speaking, a judgment debtor can challenge the validity of a judgment domesticated in his/her home state, but the procedure varies from state to state. If a creditor attempts to have a sister-state debt domesticated in your state, consult with an attorney to make sure that your interests are represented and your rights are preserved.
When a creditor domesticates a State A judgment in State B, it is possible that it will be able to garnish the debtor's wages and/or levy the debtor's bank accounts, and/or place a lien on the debtor's property.
If a lien is placed on State B real property, it is within the creditor's rights to foreclose and force a sale of the property to recover its judgment from the sale's proceeds. However, this process is time consuming and expensive, which makes it an unattractive option for creditors in most situations. To force the sale of a judgment debtor's property, the creditor is usually required to pay off any higher priority encumbrances (such as mortgages, tax liens, etc.) out of its own pocket before it can proceed with the sale.
Since the sale prices brought by auction are often significantly lower than the actual value of the property, creditors can actually lose money by forcing the sale of a property, having received less at auction than the creditor was required to pay to clear the senior encumbrances. Because of these factors, it is unusual to see an unsecured judgment creditor try to force the sale property. However, it is possible the creditor could pursue this line of attack, and therefore you should consider these risks if you own real property.
As a practical matter, I have seen relatively few creditors take steps to domesticate a judgment against a debtor. Domestication costs a creditor money and takes time. However, my experience is not necessarily a predictor of any one creditor's future behavior. A good rule of thumb to follow is the chances of a judgment being domesticated is proportional to its amount. A $500 judgment will probably not be domesticated, but a $500,000 judgment will.
Oregon judgment, California resident
It is possible for an Oregon creditor that obtained a judgment against a debtor in Oregon to file a complaint with a local county court in California for domestication of the Oregon judgment in California. Once domesticated in California, the judgment would be enforceable in the same manner as any other judgment issued by a California court.
In light of the above discussion, I encourage you to consult with a California attorney experienced in bankruptcy law regarding this matter. I am not suggesting you need to consider bankruptcy. However, a California bankruptcy attorney will understand the issues relating to the debt and the steps you can take to protect yourself or resolve the debt.
To learn more about your rights as in the collections process, see the Bills.com resource Collections Advice.
I hope this information helps you Find. Learn & Save.
Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in South Carolina, 17% have student loan debt. Of those holding student loan debt, 10% are in default. Auto/retail loan delinquency rate is 7%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.