Settling a debt after a judgment
By Fred O. Williams
COURT JUDGMENTS FOR DEBT:
AFTER THE GAVEL
Having a judgment for debt filed against you is frightening, but not the final word. Consumers have choices when dealing with a court judgment.
Even after a judgment is entered against you, it is still possible to settle a debt for less than the court-approved amount. Maybe much less, lawyers say.
It is better to settle a debt before judgment if possible, because the debtor has more leverage. The fact that a creditor or debt buyer took the trouble and expense to sue you means they think you have income or assets worth pursuing.
However, you may be able to negotiate a discount to the debt, in return for a lump sum payment. If a large payment isn't financially possible, a stipulated judgments allows you to pay in monthly installments, shielding you from garnishment, levies and liens on your property.
"Most creditors are happy to do that, rather than get an uncollectible judgment," said Martin Wegbreit, director of litigation at the Central Virginia Legal Aid Society. A creditor will benefit from not having to chase down your assets, and avoiding the possibility that your income and property is exempt from seizure. For example, seizing your car will mean hiring a towing service and, in some jurisdictions, paying for 30 days of bonded storage.
Around the courthouse there is a saying, "Slow money is better than no money," Wegbreit said.
Many post-judgment debt settlements are concluded with a phone call from a bankruptcy attorney, giving the debtor more leverage. When creditors' lawyers hear from a bankruptcy attorney's office, "they understand that bankruptcy is a reality," Arizona bankruptcy attorney James Kahn said, ratcheting up the pressure on them to make a deal. Kahn said settlements may wipe out as much as 75 percent or 85 percent of the debt, if most or all of the payment can be made promptly. "A little bit is better than bankruptcy," Kahn said. When dealing directly with a debtor, collectors may be willing to settle credit card debt for only 50 percent of the balance, if paid in cash, Kahn said -- but even that figure that is out of reach for many. "My clients say, 'If I had that kind of cash, I'd be making my payments.' "
Once a settlement is complete, get a satisfaction of judgment signed by the creditor, and make sure it is filed with the court and reflected on your credit reports, lawyers said. The judgment for debt will still appear on your reports, but creditors might view you in a better light if there is a notation that the judgment has been satisfied.
Related story: Court judgments for debt: after the gavel