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Reader Rune Horvik from Philadelphia asks:

How do huge personal court damage settlements work? For example, a couple was ordered to pay $1 million in damages to their wedding photographer for ruining her reputation. This is many times higher than the median annual American household income, and it seems likely that they don’t have this kind of money on hand. What happens if they can’t pay? Does the recipient not get paid?

Big companies may be able to pay millions of dollars in court-ordered damages, but the average American probably doesn’t have that money tucked away. Luckily, individuals who lose a court case often aren’t paying those big headline numbers that you see a jury award an injured party.

“A lot of times, what looks like an impossibly high number to try to meet ends up getting settled down to something that the defendant can pay,” said Jay Tidmarsh, a professor at the University of Notre Dame Law School. 

The amount that a jury awards depends on the type of case. If it involves a dispute over a contract, then “damages are determined by how much money the plaintiff should have had if the contract hadn’t been breached,” Tidmarsh said. If it’s an injury case, the amount awarded will factor in medical expenses, lost wages and pain and suffering. And it’s a defamation case, then factors like reputation damage and business losses will be considered.

“Money is sometimes a quite poor substitute for what somebody has lost, but money is what we use,” Tidmarsh said. “We’re trying to put the person into the position they would have been in had there been no wrong.” 

If the judgment is too high, the judge can lower it, both parties may negotiate to bring that number down, or the defendant can appeal the judgment, Tidmarsh said. 

The defendant may also have insurance that will help pay the judgment. A lot of people are not going to sue “unless they know there’s money at the end of the rainbow for them,” Tidmarsh said. So the plaintiff and defendant may be allies against the defendant’s insurance company and agree on whatever the amount they can get out of the insurer, Tidmarsh said. 

“An insurance company that fails to pay out on a policy that it’s required to can be subject to a very large liability,” Tidmarsh said. 

But if the defendant doesn’t have insurance, there are a couple of ways the judgment can be paid. The person who was awarded the judgment can seize the other party’s assets or garnish their wages, a practice in which employers withhold a certain amount of their employee’s earnings for debt payments, experts told Marketplace.

Once a judgment is final, the plaintiff can discover what assets the defendant has — whether that’s physical property or their bank accounts — and go after them as part of a formal judicial process, Tidmarsh said. 

“You can keep pursuing whatever assets it is that the defendant has or the defendant obtains. So if a year afterwards, the defendant wins the lottery for the first time and you find out about it as the plaintiff…you can go after that asset,” Tidmarsh said. 

Sheriffs are usually the ones who seize any physical assets, and will sell them at auctions to satisfy judgments. They’ll take a cut of the proceeds, then give whatever is left over to the plaintiff, Tidmarsh said. 

When it comes to assets, various things may be up for grabs depending on the state’s statutes, including cars, furniture, jewelry, clothing, antiques and money in an investment account (although retirement accounts are generally protected), said John Lenich, a professor emeritus of law at the University of Nebraska-Lincoln.  

But the defendant does have safeguards. For example, the plaintiff can’t just take their home, Tidmarsh said. (Although they can try to put a judgment lien on their property, which means they may get paid from any proceeds if the defendant sells or refinances the property.)

States also have limitations on the percentage of wages that can be garnished. It’ll vary depending on where the defendant lives, but regardless of which state they live in, the amount cannot exceed the lesser of 25% of their weekly disposable earnings or the difference between their weekly disposable earnings and $217.50 (an amount derived by multiplying the federal minimum wage by 30). 

For example, if you make $500 a week, the difference between $500 and that $217.50 threshold amounts to $282.50. But 25% of your paycheck amounts to $125, which is the lesser of the two, meaning that’ll be the maximum amount you end up paying.

A defendant can also try to discharge their debt in bankruptcy, Tidmarsh said. It may be “more financially sound” for someone to do that than have all of their assets seized, Tidmarsh explained. However, not all debts are dischargeable, including those that are based on “malicious” injury, according to United States Courts, a government website. 

States have statutes that specify how long a judgment is in effect. Tidmarsh said he’s seen judgments last as short as three years and some more than 20 years, but they commonly last around 10 years. 

“Once the judgment is entered, the clock starts ticking and you’ve got only so much time to recover the judgment,” Tidmarsh said. At the end of that period, “whatever is unpaid is unpaid,” he explained. 

You can renew a judgment, and it may be worth it to do so if the defendant is young and has a lot of future earnings potential, Lenich said. 

“But as a practical matter, oftentimes, if you get a $2 million judgment, unless there’s insurance or unless the person is pretty well off, realistically you’re not going to see much money,” Lenich said. 

If a defendant owes a photographer money for defaming them, they could try to avoid payments out of spite. They can say, “Screw it. I’m going to give up my high-paying job and I’m going to work at a minimum-wage job and just try and make ends meet. I’d rather do that than give the photographer a dime,” Lenich explained. 

If that happens, there’s not much a defendant can do about it, Lenich said.  “Or sometimes you just lose people. Where did they go? We don’t know,” he said. 

But sometimes, the plaintiff can take solace in knowing they won in court. Some cases are brought forth for vindication, rather than monetary compensation, Lenich said. 

“You get the satisfaction of having the jury say this person did you wrong. And sometimes that may be all you really want,” Lenich said.