Glossary
Default Judgment
A default judgment is a court judgment entered in favor of the plaintiff because the defendant failed to file an answer or otherwise respond to the lawsuit within the time allowed.
After a business is properly served with a summons and complaint, it has a limited time to respond. The deadline is set by court rules and varies by state and court, commonly falling somewhere around 20 to 30 days after service. If the defendant does not file an answer, motion, or other response in time, the plaintiff can ask the court to enter a default and then a default judgment. In federal court this process is governed by Rule 55 of the Federal Rules of Civil Procedure, and state courts have similar rules.
In commercial collections, default judgments are common because many debtors do not dispute the debt and simply do not respond. For a claim for a fixed sum, the court or clerk may enter judgment based on the creditor's affidavit and documents. For other claims, the court may require a hearing on damages. In most states, a corporation or LLC must appear through a licensed attorney rather than an owner, so a business that sends only a letter may still be in default.
Here is a fictional example. A janitorial products distributor, Spotless Supply Co., sues a cleaning contractor for $23,600. The contractor's registered agent is served, but no answer is filed. After the response deadline passes, Spotless's attorney files a request for default with the invoices, the credit agreement, and an affidavit of the balance. The court enters a default judgment for the principal, interest, and costs allowed under state law.
Default judgments matter to creditors because they are usually faster and less expensive than contested cases. They are not bulletproof, though. A defendant can ask the court to set a default judgment aside, for example where service was defective or there was excusable neglect, under the standards that court applies. Proper service on the correct entity and accurate supporting documents are the best protection.
Example
Spotless Supply Co. serves the debtor's registered agent, receives no answer, and obtains a default judgment for $23,600 plus allowed interest and costs.