ACH Judgment Payments

August 9, 2023

Some judgment enforcers make a good living by using payment plans with their judgment debtors. What if your judgment debtor wants to pay using ACH (Automated Clearing House) payments? What if they want to pay using check drafts, or with standard monthly invoicing and debtor-written checks?

One of many judgment articles: I am a judgment broker, not a lawyer, and this article is my opinion based on my experience, please consult with a lawyer if you need legal advice.

What matters most is that you get paid, and ACH can be a valid way to be paid. If your judgment debtor wants to pay on their judgment with ACH, let them initiate the electronic bill pay transaction, and have them schedule it on their side.

A judgment debtor’s ACH payment transaction could come back as “account closed” or “NSF”, and then you will be back to square one. With a returned check, at least in California; there are returned check laws that allow you to pursue the debtor with a new lawsuit. It may not be worth doing, but having that option might help keep pressure on your judgment debtor.

Put the responsibility of getting the payment to you on your judgment debtor. As an incentive for the debtor, payment plans can be structured to lower the amount due each month, when compared to the 25% of disposable income wage garnishment; and there will not be a need for a payroll garnishment. In such a case, the debtor will probably know that if there is ever a non-payment, then the full payroll garnishment will be started/restarted and other judgment recovery actions will follow. (Never threaten the debtor, and do not say anything you have no intention of really doing.)

Some judgment enforcers do not put payment plans into written agreements, because of the potential novation problem. Others use written settlement agreements, and sometimes they are necessary. An example is if the debtor is trying to get their drivers license back, because the DMV requires a court approved payment plan on file, before they will reinstate the debtor’s licence.

Another reason to use a signed, written payment agreement plan is that if you have to go back to court, a sympathetic judge who feels badly for taking the debtor’s money; will probably quickly shift gears when they see the debtor defaulted on a payment plan they had previously agreed to. A payment plan can be as simple as something like this:

Mr. Debtor, you have agreed to pay $XXX per month via check, money order, or cash. The payment must be postmarked or received on or before the XX of the month, or I will continue doing everything I can to enforce this judgment under the laws of this state.

If your debtor asks to make an ACH payment, have them set up the transfers to your bank account. If the debtor cooperates, each month money will automatically come in. And, if there are any fees attached to the ACH transfers, they will have to pay them.

When debtors want to pay by cash, some enforcers keep a free business checking account at several banks; so they can tell debtors those addresses, and asks them which bank is closest to them. Then, the enforcer gives them the account number to make a deposit. Then, they ask the debtor to forward the bank’s email them afterwards, so they can verify the deposit and credit it to the amount due. This has the advantage of not having to wait for a check to clear.

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