You have taken another party to court and won a sizable money judgment. Now it’s time to collect on that judgment. The debtor’s attorney contacts you and offers immediate payment if you agree to accept less than the full amount. What should you do? Should you accept the deal or hold out for full payment?
It can be very tempting to reject such an offer in favor of aggressively pursuing every penny owed. There are valid reasons for doing so. But there are equally valid reasons for accepting less than the full judgment amount. That’s why we recommend that creditors sit down and thoroughly go through their options with an attorney before proceeding.
The Principle of Accepting Less
The principle of accepting less than the full judgment amount is pretty straightforward. Either party can make the offer. Regardless of who initiates it, the debtor agrees to make immediate payment if the creditor agrees to accept a lesser amount. Making the payment satisfies the debt and both parties move on.
Note that there are some legal ramifications to reaching such a deal. We won’t go into them here. Any questions you might have about those ramifications can be answered by an attorney. Instead, let’s discuss why a judgment creditor might accept less than the full amount.
The Debtor Is Judgment Proof
A creditor’s investigation into the debtor’s income and assets could reveal that the debtor is genuinely judgment proof. This means that he has limited income and no assets worth pursuing. Offering a lesser amount may be the debtor’s way of making good as best he can despite limited resources.
From the creditor’s perspective, a judgment proof debtor makes collecting a debt from them extremely difficult. A creditor could wait things out and see if the debtor’s finances improve down the road. Or, he could choose to accept a lesser amount in order to put the case to rest.
The Risk of Getting Nothing
Hand-in-hand with the judgment proof debtor is the very real risk of not getting paid anything. Not getting paid is always a risk no matter a debtor’s financial resources, but the risk is heightened when a debtor is judgment proof.
When faced with the choice of getting a lesser amount or getting nothing at all, some creditors will choose the former. A lesser amount might at least cover the creditor’s legal fees and court costs. A lesser amount is better than eating those expenses.
Limited Collection Resources
Successfully collecting a money judgment takes time and effort. It also takes financial resources. What if a creditor does not have the time or resources necessary? It might be wiser to accept a lesser amount and move on.
In this regard, it’s important to note the judgment collection can take years in some cases. That’s a lot of time to devote to collecting a debt. Not only that, doing things like investigating debtor assets and filing writs of execution have financial costs attached. A creditor could spend a substantial amount of money on collection as well as investing a ton of time.
Accepting a lesser amount in order to close things out saves time and money. It may be the better choice when a creditor is working with limited collection resources.
Let’s Talk About Your Case
There is no set criteria for determining when it’s better to accept a lesser amount. Each case is different. If you’ve decided to pursue collection and you need help, consider giving Judgment Collectors a call. Let’s talk about your case. We might be able to handle collection on your behalf.