subject: Satisfying A Judgment With Settlements [print this page] I am not an attorney, I'm a judgment referral expert. This article is my opinion, and is not legal advice, based on my experience in California. If you ever need a strategy to use or legal advice, you should contact a lawyer.
Judgment settlement happens when a judgment debtor and the judgment owner reach a compromise to satisfy their judgment for an amount that is less than the full (often hypothetical) amount owed.
The benefits for the creditor are they save money, time, and hassles; because conventional judgment recovery isn't easy or cheap. The advantages for the judgment debtor are they save money and hassles, because they get the judgment against them satisfied quickly, by paying far less than the total owed.
Settlements among creditors and debtors can happen at any time, however it often takes a long time. In the beginning, the judgment debtor often believes they will not ever need to pay off the judgment, and the creditor believes their judgment is guaranteed and will be easy to collect in full. Settlement is almost always between those 2 extremes.
Sometimes disputes get settled, before a cause of action is taken to court. Some settlements are reached while legal proceedings are moving along in court. Settlements can also be reached after the judgment is final.
Settlements are a good idea, because many judgments are never collected. Getting 50% of what is owed is a lot better than getting 100% of nothing. Settling can be the best way to enforce judgments.
It doesn't matter which side starts the settlement negotiation, what matters is that both sides are honest and quickly do the right thing. The debtor pays the judgment owner, the creditor then satisfies the judgment. With all negotiations, there is a chance that with some cooperation, both sides may find a way to reach a settlement agreement that is a win-win.
Often, settlements will not be possible as either judgment debtors are merely attempting to fool a judgment owner, or the creditor refuses to understand that judgments aren't cash (and will not compromise), or the debtor is not willing or able to pay enough to be a reasonable settlement payment.
For final judgments, I have never seen a Judicial Council judgment settlement form. Most settlement agreements are crafted by lawyers for every unique settlement situation. The details of a settlement agreement are worked out among the parties or their representatives. The success of any settlement agreement hinges on both sides believing the settlement is best for both sides.
Most settlement agreements are long and complex, however they do not need to be. It does not matter how solid a contact is, it is only as good as the better of the two parties signing the contract. Usually, a judgment debtor cheated a judgment owner in one way or another, which was the cause of the judgment and/or lawsuit.
Settlements are contracts that usually mean very little, until the payment is completed successfully. If a judgment owner fails to satisfy the judgment, it would allow a judgment debtor to sue them and get another judgment against the creditor.
If a judgment debtor fails to pay, a creditor loses big, because they don't get any money, and because their good-faith agreed settled amount may (debatably) become the new amount the creditor can claim as being owed in the future, especially in an appeals or bankruptcy court. Some settlement agreements include provisions stating that if the judgment debtor files for bankruptcy protection or defaults, the pre-settlement amount still stands, and is now recoverable.
Sneaky judgment debtors often agree to settle, and sign a settlement agreement, however they don't follow up and pay the judgment owner. Creditor should not satisfy a judgment until a check clears. It is usually smart to meet the judgment debtor at their bank, and witness them pay for a cashier's check to pay off the judgment.
To fulfill an agreement to settle a judgment, the debtor must pay the creditor, not try any tricks, and not go bankrupt right after paying the creditor. A judgment owner must satisfy the judgment after payment is secured.
What happens when a judgment owner is paid, cashes the check, waits until it clears, satisfies a judgment; and then the debtor goes bankrupt? The "Achilles' heel" of settlement agreements occurs if the debtor pays a creditor, and then goes bankrupt. The usual bankruptcy waiting period is within ninety days after a judgment owners is paid.
Making settlement agreements bankruptcy-resistant is beyond the scope of this article. Consult with an attorney, and look on the web for "Jerrold S. Kulback How to Bankruptcy-Proof Your Litigation Settlement".
