It is usually very good news, when you settle a big judgment for less than the full amount owed. $100 in hand beats a chance at $100 over time.
Many judgment-related settlements tend to make the underlying judgments obsolete, however it does not have to be this way. I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.
The problem with titling a document “settlement agreement” is that such agreements can be breached, and another round through the court is often necessary to bring a new case to judgment. Instead, consider titling such a compromising document as a “memorandum of understanding”, which accomplishes the same end result, without the potential to litigate a breached settlement agreement.
What if the judgment debtor’s attorney insists on a settlement agreement, should you stand your ground; or roll over and sign their agreement? If you sign a settlement agreement, consider the chances of your debtor not paying you. After all, if they were decent, they would have paid you already.
What if you settle, and sign one of the types of settlement agreements that you should never sign, one that includes the phrase “release of all claims”? Then you will have a potential “novation” problem.
A novation is a new obligation that replaces the old one as soon as you sign it. You want to avoid this at all costs, because if you sign such an agreement; it can be interpreted as a “novation”, and your judgment becomes toast as a matter of law, the moment you sign it.
Better than a novation is an accord and satisfaction, where you agree to accept something different to satisfy the previous obligation, however the previous obligation still stands if the agreement is breached. This is a huge difference.
As long as you have language in your agreement that states that this agreement does not replace the original judgment obligation, the judgment continues in full force but is temporarily stayed; you will avoid novation and your judgment will remain active.
It is a good idea to add a paragraph in your agreement that says the agreement is an accord and satisfaction, and is not a novation. The common boilerplate in most prejudgment settlement agreements are a trap for the unwary creditors in post-judgment matters.
After full performance of the agreement by the debtor, the debt gets extinguished; but absent full performance by the debtor, the judgment becomes due again in full.
If the debtor pays the amount due as per your compromising memorandum of understanding, then you satisfy the judgment. If you satisfy a judgment, be sure to complete these seven steps if they apply:
1) Always file a full satisfaction of judgment.
2) Record the satisfaction of judgment in every county where you recorded an abstract of judgment.
3) File a release of any UCC (Uniform Commercial Code) judgment liens with the Secretary of State.
4) Release all pending levies.
5) Release all other judgment liens you have obtained.
6) Dismiss any fraudulent conveyance lawsuits related to the judgment with prejudice.
7) Agree to sign any other document reasonably requested by the judgment debtor to confirm that the judgment has been fully satisfied and all liens have been released.
Some judgment enforcers will not sign any settlement agreements. They say: “As long as you hand over a check, I will give you a satisfaction, period”. The judgment is a matter of public record so they refuse to sign such an agreement.
Some attorneys have asked judgment enforcers to move to have judgments vacated for payment. Some judgment debtors do not like the stigma of a judgment but to that, most enforcers would say something like: “Too bad, you should have handled this long before now if you did not want a judgment against you on the public record”.