Creditors can use alternative methods to collect the judgment or put pressure on the debtor, such as garnishing wages, freezing bank accounts, securing a lien against a home, and trying to force a sale. [2] X Research source Exercising these options takes time and money, as the creditor typically must return to court to get a court order. Debtors can make it more difficult for creditors to reach their assets. For instance, if you suspect your creditor is trying to levy your bank account, you can move your money to a new account. Also, some judgment debts can be discharged in bankruptcy. Creditors will often accept less than the full amount of the debt if they suspect that the debtor will file bankruptcy to avoid the debt entirely.
If you come to an agreement, or if the other side makes an offer, it is a good idea to get a confirmation in writing. You can write an letter or an email after a phone call, saying, for example, “This is to confirm our discussion earlier today, during which you offered to settle the judgment for $500. I said I would consider your offer and accept or reject by Tuesday, June 1. "
Creditors may want to factor in the cost of having to go back to court to seize a debtor’s assets. For instance, if it will cost you $200 in fees and costs to levy the debtor’s bank account, so you might want to consider settling for $200 less than the full amount of the debt. Debtors should be prepared to share their hardship circumstances during negotiations. Consider this hypothetical case: A debtor owes a $1000 judgment, but he cannot afford to pay it because he was unemployed for three months and almost depleted his savings before he found a new job. The debtor offers to pay 20% of the debt ($200) in two monthly installments. The creditor agrees to accept this greatly reduced payment because the creditor understands that he is not likely to get much more from the debtor, and because he will get nothing if the debtor decides to file for bankruptcy.
The names of the parties; The case number; The payment terms, including: The total settlement amount The amount of each payment The due date of each payment (monthly, etc. ) The form of payment (check, cash, credit card, etc. ); A statement that the creditor will not enforce the judgment as long as the debtor makes the specified payments; and A statement that the creditor will file a “satisfaction of judgment” with the court once the last payment is made.
If you are the creditor, keep track of the payments being made and ensure you are getting the money you are owed. In addition, do not you, as the creditor, need to make sure you are not breaking any terms of the agreement. For example, if you have promised not to enforce the judgment so long as payments are coming in, do not go to court and garnish the debtor’s wages if they are paying you.
If you are considering filing for bankruptcy, you may want to have a bankruptcy attorney speak with your creditor. If the creditor sees that you are seriously contemplating bankruptcy, he or she may be willing to settle the judgment for much less than the total amount, rather than risk getting nothing. In turn, if the debtor can settle the judgment, bankruptcy may not be necessary.
State law differs on how liens work. For example some states do not allow liens against homes. They also differ in how long a lien lasts. [9] X Research source
