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Strategic Judgment Buying
1) To buy the judgment, and then attempt to settle with the debtor to earn a quick profit.
2) Try to recover as much as possible from the judgment debtor over time.
3) Try to resell the judgment later to someone else for a profit.
4) For a strategic reason, and that is the subject for the rest of this article. This article is my opinion, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.
Besides attempting to make a profit, there are other strategic reasons to buy judgments. While the reasons vary, usually one judgment is bought to offset some or all of the debt from another judgment. Often, a strategic judgment purchase has nothing to do with trying to recoup money from the purchased judgment.
Many strategic judgment purchases involve judgment brokers, because brokers handle introducing judgment sellers to buyers in a way that helps reduce the chance of (wasteful and frustrating) wishful thinking preventing a cash upfront purchase price compromise from being successfully reached.
As an example, a company named Creditor won a judgment against a company named Debtor. Later, another company named Buyer wants to buy that judgment from the Creditor. If the Buyer contacts the Creditor directly, the Creditor will probably want top-dollar, because they know Buyer (needs) to buy their judgment and has directly contacted them.
Alternatively, if the Creditor finds a judgment broker (who charges the creditor nothing), and the judgment broker finds the right judgment Buyer; then the Creditor is more likely to agree to sell their judgment at a more realistic cash upfront price. This helps the Creditor avoid imagining a inflated and imaginary judgment selling price.
The judgment broker is a third-party matchmaker that can help third-parties buy judgments for strategic reasons. Judgment brokers are paid only for success by the judgment buyers, a small percentage of a successful eventual recovery. Judgment brokers are usually not attorneys and do not own judgments in any way, they are only matchmakers.
Note that if your creditor is a bank, credit card, or a collections agency, they almost always won't play ball and settle with a third party settler/matchmaker/broker. Also, whenever your creditor is actively trying to recover the judgment against you, they will not want to settle. In these cases, you are stuck trying to settle directly with the creditor, bank, or collection agency.
Another common strategic judgment buying complication that can happen is when the judgment creditor is a business. Sometimes employees (especially in large companies, government-related agencies, and nonprofit companies) think only of their own pockets, and that they will not directly benefit if they help their employer make or find money. I have seen the following type of complication happen several times:
A company named Buyer wants to buy a specific judgment where Creditor sued Debtor. If Buyer contacts Creditor directly, that would tip their hand, that Buyer needs to buy the judgment; and Creditor would then likely want top-dollar and the deal would not work. So, instead, Buyer contacts a judgment broker, with instructions that they will pay (e.g.) $20,000 for their $150,000 judgment, which is about 13%, which is more of a percentage paid than 99.5% of all other cash upfront judgment sales, unless the debtors are rich in available assets.
If a judgment broker contacts individuals working at the Creditor company, they are usually not interested. It turns out that from the secretary to the CFO, usually not one worker wants to try to help their company make $20,000 from a 6-year old judgment against a defunct long-gone business. Without this judgment sale, the company would never get $20,000 for that judgment. This is because such a judgment would be worth less than $100 because the Debtor is a defunct and out of business corporate judgment debtor, with no people liable for paying the judgment, and no assets. Only for strategic reasons would a buyer pay $20,000 for such a judgment
Unfortunately, usually no company employee cares about helping their company in this way, most dismiss this as a scam. It almost seems like what would be needed, is $30,000 so (e.g.) two employees could be bribed $5,000 each, if they could successfully persuade the company owner(s) to sell their judgment for $20,000. Of course bribes are not above board, and it is too bad that many strategic judgment sales will not work when employees do not care. In some cases, the solution is to keep contacting different officers, directors, and employees until one is found that cares about their company's bottom line.
Strategic judgment sales can and do work, however all parties must be aware of the reality that judgments always sell for a very steep discount of their face value, and helping your employer is a smart thing to do. (See our Judgment Settling article.)
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