Small claims court is designed to help individuals and businesses settle legal disputes out of court at a low cost and without a lawyer.
It is intended to be low-stress, expeditious, and less complicated than other courts.
But not all claims in life can be successful. If you have filed or defended a claim and the judge does not rule in your favor, you may be wondering, Can you go to jail for not paying a judgment in small claims court?
Knowing the consequences of an unfavorable decision can help you plan your next steps. Financial consequences, legal consequences, and what to do next may be different depending on whether you are the plaintiff or the defendant.
For the Defendant: Losing Means a Judgment Against You
If you lose your case in small claims court, the court will enter a judgment against you. This is a court’s determination that you owe the plaintiff a specific amount of money. This can include:
- The original claim amount
- Court filing fees
- Service or administrative fees
- Interest, in some cases, and possibly other costs
A judgment is a written decision and an obligation to pay the awarded amount.
What Happens After a Judgment?
There will be two results if you lose and a judgment is entered against you:
- You choose to pay the judgment amount voluntarily (presumably by the deadline set by the court). By doing so, you will resolve this matter without the need for further legal action.
- You do not pay, and the judgment creditor (the other party) takes enforcement action to collect the judgment.
It is possible that the winner can enforce their judgment and try to collect money from you in the following ways:
- Wage garnishment, where your employer is ordered to withhold a portion of your paycheck in order to pay the judgment
- Bank levy, in which funds are taken directly out of your bank account
- A judgment lien can be placed on your property. A judgment lien makes it difficult to sell your property because the buyer will want to clear the lien to ensure you have a clear title. Typically, judgment liens are good for ten years and can be renewed for additional ten-year periods. If you do not sell your property before the expiration of the lien, the judgment creditor must renew the lien, for it will automatically expire. This typically means that a judgment can affect your ability to sell or refinance until the judgment is paid or the lien expires.
- Credit Impact: Having a small claims judgment does not have an automatic impact on your credit rating, but your report may show the judgment if your creditor reports it as a debt owed. If you do not pay the judgment and it continues to go unpaid for several years, the debt will be turned over to a collection agency. They will then report the collection to the credit agencies, and it will negatively impact your score.
For the Plaintiff: What If You Lose?
If you’re the person who brought the case and the judge decides in the other person’s favor, the court won’t award you any money. You will likely be required to pay your own court costs, although this isn’t usually the case for the other party. You also can’t file the same claim again in small claims court.
Can You Appeal the Decision?
Both plaintiffs and defendants might have the opportunity to appeal the small claims court ruling, but this depends on your individual state’s rules. In many jurisdictions:
- Only the defendant has the right to appeal small claims rulings.
- An appeal must typically be filed within a specific timeframe, usually 10 to 30 days.
- It might result in both of you going to trial again in a higher court for presentation of the facts.
Before appealing, consider the cost, time, and likelihood of success.
What If You Can’t Afford to Pay the Judgment?
If you can’t pay the judgment, you may have some options under the law:
- You can ask the court to let you pay off the judgment in installments through a court-sponsored payment plan.
- You can ask the court for relief if you can’t afford to pay it.
- If the situation is serious enough, you may be able to eliminate the judgment by filing for bankruptcy.
You can get help understanding the law and developing a legal strategy from a lawyer. In rare cases, speaking with a credit counselor may also be helpful.
Prevention: Prepare Thoroughly
The most frequent small claims court horror stories happen because someone made a mistake in getting ready. Forget a critical document, do not make a persuasive argument, OR neglect to follow procedures. Do not lose a small claims case because you failed to prepare or winged it. Be organized. If you’re in doubt regarding the law, employ a lawyer or at least consult with a legal aid clinic; the advice is often free.
Understanding the Impact of a Small Claims Court Case Loss
Knowing what happens if you lose in small claims court is important so that you can decide whether to file a lawsuit and how to prepare for it. If you lose, there could be enforcement of judgment against you, financial penalties, or long-term consequences like wage garnishment or harm to your credit.
Still, understanding your rights and potential solutions (e.g., payment plans you could agree on with the winning party or an appeal) will help you handle things effectively and avoid lasting damage.
But most of all, it’s important to treat small claims court seriously and properly prepare for it so you don’t lose and suffer consequences.
