You have won a money judgment against a debtor with modest means. You had hoped to collect the full amount plus late fees, legal fees, court costs, and interest. Yet now the debtor is offering a lesser amount as a lump sum payment. Should you take it?
It’s a Normal Offer
If this is your first time attempting to collect a money judgment, understand that an offer of a lesser amount is normal. Attorneys advise their clients to make such offers all the time. If a debtor can convince the creditor to accept a lesser amount as full payment, both parties can go on their way with no further hassle.
Needless to say, some judgment creditors are put off by such offers. And why not? The court has affirmed a legal debt the other party is compelled to pay. For some creditors, there simply is no reason to accept less than the full amount. Or is there?
Collection Can Be Time Consuming
One of the first things judgment creditors should consider, but often fail to, is the time commitment. The short and sweet way of saying it is that collection can be time-consuming. Very few money judgments are collected within the first month or two. Most take anywhere from several months to several years.
A lump sum payment eliminates the risk of having to wait an exceptionally long time to get paid. It also eliminates the time-consuming court procedures that will inevitably follow if the offer isn’t accepted. So ask yourself this: are you willing to put in the time to get every penny owed?
The Debtor’s Assets Might Be Limited
Time may not be an issue for you. But there is still the question of the debtor’s assets. Maybe the debtor has a significant amount of cash on hand right now. But perhaps it is all he has. He has no non-exempt property of any real value. He also does not make enough money to justify garnishment.
Accepting a lesser amount as a lump sum payment may represent your best chances of getting at least something. Maybe it is not the full amount you are owed. But it is also more than you might see in the future. You need to weigh the benefits of taking a lesser amount now versus the potential risk of getting nothing down the road.
The Offer Is a Sign of Cooperation
On a more positive note, try to look at the offer as a sign of cooperation. This is important because so many debtors make no effort to cooperate at all. After the court case, you never hear from them again. You are forced to chase them down and search for their assets on your own.
Cooperative debtors are hard to come by. If you are not willing to go after an uncooperative debtor, maybe accepting a lesser amount is your best choice.
You Can Always Counter
Let us assume you don’t like the idea of accepting a lesser amount. Did you know that you can counter? Perhaps you could propose that the debtor still pay the full amount through a monthly installment arrangement. By spreading the debt over many years, the debtor can pay what he owes without jeopardizing his budget.
An offer of a lesser amount on a judgment collection may not be what you first envisioned when you decided to take the debtor to court. But it is now your reality. You should at least consider it. There are as many valid reasons for accepting a lesser amount as there are for declining it.