Writing Paid In Full On Checks

August 13, 2023


What happens when a judgment owner or an assignee of record (a judgment enforcer) has a judgment debtor who claims that they owe less than what you and the court both agree the debtor owes? When this happens, the most likely reasons are:

1) The judgment debtor is lying or misinformed. Politely tell them to supply some evidence or you cannot change what they still owe. If they cannot supply any proof that they paid off any portion of, or all of their judgment. Tell them “until proof is supplied, nothing stops me, the judgment creditor, from attempting to recover the entire judgment”.

2) (If you are the assignee of record for the judgment) Your Original Judgment Creditor (OJC) may have lied to you, forgot, or is trying to pull a fast one on you. If the debtor shows you proof they really paid the OJC, then the OJC (if you have a contract with them) has wronged you and owes you money, although you may have to sue them to have a chance to get paid. If the OJC did not satisfy the judgment to the extent that it was repaid with the court, they have also wronged the judgment debtor.

3) You get a check from your judgment debtor or their lawyer, for less than what you are owed, with wording on the check similar to “payment in full, this satisfies the judgment”. Of course, there would be no problem if there was already a good faith signed agreement in place with them when you cashed their “paid in full” check. However, without a signed agreement (or some other type of confirmation of understanding between both parties) then this might be them attempting to fool you.

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.

Because of debtor-friendly laws, a judgment debtor writing: “paid in full” on a check may be a trap; and one should consider carefully how they respond. There are at least four options when a debtor tries to trick you by writing: “paid in full, this satisfies the judgment” on a check they send to you:

1) I think the best option, by far, is to use this wonderful lucky break of learning where your judgment debtor banks to your full advantage. You are not obligated to accept their settlement check offer. You can try to have the Sheriff attempt to levy their bank account instead of cashing the check.

Buy a writ of execution from the court ASAP, and then have your Sheriff levy their bank account. The same day the bank levy is served, drop a letter in the mail to your judgment debtor, and include their uncashed check. Explain that you are returning their check because you require payment in full to satisfy the judgment. This option might get you paid; or something could go wrong, for example the debtor could file for bankruptcy protection.

2) Return their check with a letter explaining that the total amount owed is required to satisfy the judgment. Make a copy of the check first, so you have a possible levying option in the future.

3) Cross out their “paid in full” wordings, and try to cash their check. However, this is a bit risky because of strong Federal debtor-friendly laws. I would skip this, and do 1,2, or 4.

4) One way to look at this “paid in full” trick is just to settle, when the judgment debtor sends you a letter stating that cashing their enclosed check will be a complete satisfaction of your judgment, and writes on their check, “full and final payment” or “satisfaction in full”. If you deposit their “restricted endorsement” check, you might actually be settling for the amount they sent you, as the full satisfaction of your judgment.

As I understand it, nationwide, the Federal Uniform Commercial Code 3-311, trumps State civil laws in “paid in full” debtor check situations. In the past, under most State civil codes, creditors could strike the paid in full language, and deposit the check. The more recent Commercial Code division 3 on negotiable instruments does not provide for striking such language.

The Federal Commercial law was instated after State civil laws, and it trumps State civil laws. A Federal case that made a decision between the conflicting State and Federal laws was DIRECTORS GUILD OF AMERICA vs HARMONY PICTURES 32 F.Supp.2d 1184. That case still seems to hold, and has been cited in at least 11 decisions, most recently in 2009.

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