There is risk in almost everything, including getting repaid on your judgment. Many judgments result from someone being scammed, and a few judgment debtors attempt to scam their creditors again when they “satisfy” the judgment. The classic example is when you take a check to pay off your judgment, deposit it, satisfy the judgment; and then a week later, your bank tells you that check did not clear.
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.
After someone pays off a judgment, they expect the former judgment creditor to satisfy that judgment immediately. As much as the judgment creditor wants to be paid and satisfy the judgment, there is often reason to wait until you know you have been repaid “for sure”. Ultimately, very few things are 100% for sure. If the creditor satisfies a judgment and gets ripped off, often the only recourse is to sue again, usually to get another judgment.
The safest way to accept payment to pay off your judgment is to meet your judgment debtor at their bank and watch them get either cash, or a cashier’s check (and then deposit that cashier’s check at your bank ASAP).
Try not to file a satisfaction of judgment at the court until you are sure you have actually been paid. If your judgment debtor wants a satisfaction immediately, then only cash counts. Satisfactions need to be notarized, and that is OK because you can bring it, and not give it to them or court file it; until you are paid cash, or with some other guaranteed funds. The rest of this article covers some of the ways one can get ripped off, accepting payment for a judgment:
1) Bankruptcy. As per 11 USC section 547, if the debtor pays you and then quickly files for bankruptcy protection, the BK trustee might decide it is a preferential transfer; and order you to pay the court everything the debtor paid you. Different from most other ways that a creditor can get ripped-off, there is usually no recourse for this situation.
2) Cash. There is still some good-looking counterfeit currency out there. Although not likely, you could get some from your judgment debtor. A cheap investment to combat this possibility is buying a bill checker pen.
3) Personal checks can bounce, even several weeks after you deposit them. Stop-payments can even be placed on cashiers checks. It is usually safe 10 business days after deposit, before you can presume checks are good. If your debtor’s check bounces, they may owe you more, and their dischargeable debt (if they file for bankruptcy protection) might become non-dischargeable. Somebody could argue that your damages are only the returned check charges, and not the amount of the bounced check. And, the cost of filing the new lawsuit to try to recover the check will be much more than the returned check fees.
Another scam that sometimes bites lawyers is when an ex-spouse overseas asks a lawyer to collect a support order where the ex-husband already paid a portion, and the ex-wife just needs to “motivate” her ex to pay her the rest. They send a check for (e.g., 20) times the amount of the lawyer’s retainer/costs, The check is deposited, and then the ex-wife demands a refund. Of course, her check was a fake in the first place, and it will be too late to stop the payment on the lawyer’s check, and some lawyers have been burned this way.
4) Money orders. Stop-payments can be placed on money orders. Be aware of a scam where the debtor buys a money order to pay you, and then takes their receipt back the next day and tells the issuer the money order was destroyed (e.g., “my dad shredded it because I left it on top of some other papers, and his eyes are not so good”). The issuer might return their funds to them. Then, the debtor gives you that original money order they had claimed was lost. When you deposit the money order, it is initially accepted by your bank and shows up as a deposit, however in about 10 days it bounces.
5) Accepting credit cards or using online systems such as PayPal. There are portable credit card payment devices such as SquareUp.com. Square is a device that accepts credit card payments using a smart phone. What if you could meet your judgment debtor in court and scan their credit card to pay off your judgment? That sure would be convenient, however there are risks and downsides to doing this. There are two kinds of risks with taking credit card payments to repay your judgment:
5A) The laws and contracts in credit card merchant agreements mean you must be careful not to violate the terms of your contract. Contact your merchant to verify that you may use your merchant account for the purpose of accepting payments for repaying judgments or debts.
Companies such as PayPal may have special restrictions, so read the fine print in their agreements. Such restrictions are there because they are a merchant services provider or a credit card wholesaler. They are an accumulator of smaller transaction amounts made by their individual customers, and do not need to have any legal capacity. If they are not happy with a transaction of yours, they can just reverse the transaction and debit your account. They have a remedy, so a new lawsuit would not be needed.
5B) Credit card charges can be disputed or charged back. Imagine that you swiped your debtor’s card with a portable device attached to your smart phone. Five minutes later, the debtor might be on the phone to stop that transaction. Sometimes an authorized credit card charge is little more than another promise to pay. It is enforceable, however it requires a new lawsuit. If you have the judgment debtor’s acceptance signature on an authorization form, it will be harder to dispute later. You can also add credit card fees, if they are on your authorization form.