Civil court is a somewhat unique environment with its own language and terminology. Take the term ‘dormancy’. It applies to money judgments and collecting them. Dormancy is normal in states that recognize it. Not all do.
Dormancy refers to the state of an unpaid money judgment. In states where it is recognized, a money judgment would be considered dormant if the creditor has not attempted any meaningful collection efforts within a certain amount of time. We can use Ohio as an example.
If no meaningful collection efforts have taken place within five years, a money judgment is considered dormant. This does not mean that the judgment is dismissed or that the debtor is no longer legally obligated to pay. It simply means that, for the time being, the creditor has chosen not to proceed with collection.
Reviving a Dormant Judgment
Most states that recognize dormancy allow dormant judgments to be revived. Ohio creditors can file the appropriate paperwork to revive for up to 10 years. There are two important things to remember here:
- Collection Efforts – Collection efforts may not be resumed on a dormant judgment until the judgment has been revived by the same court in which it was originally entered.
- Statutes of Limitation – Dormancy is not a legal replacement for a statute of limitations. Even states that recognize dormancy have statutes of limitations placed on civil judgments. The typical statute of limitations is 7-10 years.
States differ in how they apply dormancy to statutes of limitations. Consider a situation in which a judgment goes dormant because the debtor ends up in prison for a specified amount of time. There is no point in trying to collect during that time. But once the debtor gets out, reviving the judgment might be worthwhile.
How a statute of limitations would play into such a circumstance depends on state law. Before choosing to allow a judgment to go dormant, it is in a creditor’s best interest to research applicable laws.
Reasons for Judgment Dormancy
All of this begs the question of why a judgment creditor would allow a judgment to go dormant. The previously cited example points us in the right direction. Sometimes, circumstances warrant dormancy rather than completely abandoning a judgment.
Judgment Collectors is a Utah collection agency specializing and collecting money judgments in nearly a dozen states. They explain some of the many reasons behind dormancy:
1. Lack of Income
The creditor might choose to allow a judgment to go dormant due to a lack of debtor income. The debtor does not have a history of insufficient income; his current circumstance seems to be unusual. Because there is a chance that his income could increase down the road, the creditor simply decides to hold back for now. Collection efforts will resume when the debtor’s income increases.
2. Lack of Valuable Assets
Creditors looking to use assets as leverage may not have anything they can go after with property liens or writs of execution. But if they suspect things will change down the road, they might choose dormancy over abandonment. After all, a debtor could inherit property in the future.
3. Lack of Creditor Resources
Still another reason behind dormancy is a lack of creditor resources. At the current time, the creditor simply does not have the ability to conduct collection efforts. So instead, temporary dormancy is preferred. The creditor will resume collection efforts when the resources are there.
Dormancy is a legal doctrine recognizing that a judgment creditor has not attempted to collect for quite some time. But the doctrine still recognizes the right to collect in the future should circumstances warrant.