Judgment Settling Tips

August 12, 2023


For both judgment debtors and judgment creditors, there are many advantages to settling the judgment between them, when compared to the typical protracted judgment enforcement procedures to recover a judgment. My articles are my opinions, 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.

It takes two to tango. For judgment creditors, what is required is a realization that judgments are not cash and that (e.g.) half of something is better than all of nothing. In judgment recovery, everything depends on the judgment debtor. In certain situations, with poor debtors for example, when one compares settling for a small fraction of what is owed; with the judgment debtor filing for bankruptcy, a small fraction settlement is a big win.

For judgment debtors, what is required is an understanding that if they have available assets, including any personal assets with value; they are far better off by settling. If they do not settle, they may be exposed to potential legal actions to recover the judgment against them, over the long term. Some judgment enforcers have levied the debtor’s family pet! Settling avoids a lot of stress and avoids extra costs; for example the accruing interest owed, expenses the creditor incurred at the court, the Sheriff, and possibly process servers.

If either the judgment creditor or the judgment debtor is not realistic and flexible enough, settlement efforts will not succeed. The judgment debtor requires more than a desire to settle, they also need the money to settle with. When judgment settlement works, the judgment creditor gets paid; and the judgment debtor gets their judgment satisfied, so nobody can ever legally bother them about that judgment anymore.

The number one thing that goes wrong in settlement agreements is when the judgment debtor fails to pay the judgment creditor. The creditor must take care to put in writing, that should the judgment debtor fail to pay the agreed amount on time; the settlement agreement is void, and the full amount is now due, and judgment enforcement actions will be attempted and repeated until the judgment is repaid.

Without threatening the judgment debtor in any way, politely remind them of the probable expenses, hassles, and time duration for regular judgment enforcement procedures. Without making any kind of threat, impress on them that you are serious in settling or recovering your judgment, and all of the legal options available to you, without threatening or implying that you plan to use any particular action or procedure.

Often, the first settlement offer comes when the judgment owner mails a first “demand letter” to their judgment debtor. If the judgment is old enough for some interest to have accumulated, then one may decide to offer some discount for all, or a portion of the interest owed, in exchange for immediate payment.

In all settlement offers, it is best to include a time limit. Typical time limits are between ten to thirty days. If the judgment debtor flakes or snoozes, they lose. Any subsequent offers should be less advantageous to the judgment debtor than your previous offers. That way, the judgment debtor will see that the longer they procrastinate, the more difficult it will be for them to get any kind of discount.

If your judgment debtor starts making settlement offers or counter-offers, that is progress, and you should “strike while the iron is hot”. Respond to any offer initiated by the judgment debtor with a counter offer that is better for you, than their offer. For example, if their first offer to pay you $90 a month for 26 months, you might come back with your proposed offer of $125 a month for 19 months.

When a judgment debtor makes you an offer, you can assume their offer is one they are comfortable with. What you might not know is whether their offer is the best they can reasonably pay. Answering them with your counter-offer may reveal what they can really afford to pay. Getting some money every month is better than not getting any money.

If your judgment debtor really cannot afford to pay more than their first offer, accept their first offer. If they ask you to give up all the interest owed, you might agree to discount or omit the interest only after they have promptly fulfilled all of the terms of the agreement.

Whenever you reach a settlement with your judgment debtor, make sure that every detail is ironed out, and everything is in writing. Approach the judgment settlement in a businesslike fashion. Make it crystal clear that if the judgment debtor fails to adhere to the specific terms of the agreement, all deals and discounts are void, the full amount is due, and you will be free to recover the judgment with gusto.

Beware of tricks, I have seen tragic cases where a judgment debtor was sued and convinced the plaintiff to dismiss their lawsuit with prejudice (meaning the issue cannot be raised again) in exchange or a settlement agreement. The plaintiff dismissed the judgment in court as the debtor asked, then of course the debtor did not pay, and the plaintiff was stuck with a promissory note instead of a judgment.

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