I am not an attorney, I'm the nation's only judgment broker. This article is my opinion, and is not legal advice, based on my experiences in California. If you ever need legal advice or a strategy to use, you should contact an attorney.
Judgment settlement happens when a debtor and the creditor agree to compromise and satisfy their judgment with a payment that is less than the full (usually theoretical) amount due. .
Some benefits for the creditor are they save time, money, and hassles; because typical judgment enforcement is not easy or cheap. The advantages for a judgment debtor are they save money and hassles, because they get the judgment against them quickly satisfied, and pay far less than the total due.
A settlement between judgment owners and judgment debtors can happen anytime, however it usually takes a while. In the beginning, the debtor usually thinks they will never need to repay the judgment, and the judgment owner thinks judgments are guaranteed and are easy to recover completely. Settlements are nearly always between those 2 boundaries.
Some differences get settled, before the cause of action is brought to court. Some settlements are reached while legal proceedings are progressing in court. Other settlements are reached after the judgment is final.
Settlements are a good idea, because many judgments are not recovered. Getting half of what is owed you is much better than getting all of nothing. Settling is usually the best way to recover judgments.
It does not matter which side starts the settlement discussion, what is important is that both sides are honest and quickly do the right thing. The debtor pays the judgment owner, the judgment owner then satisfies the judgment. With any negotiation, there's the chance that with some give and take, both parties can find a common ground to agree to settle in a way that lets both parties win.
Many times, settlements are impossible as either debtors are only trying to trick the creditor, or the creditor refuses to believe that judgments aren't cash (and will not compromise), or that the debtor isn't willing or able to pay enough to be a fair settlement offer.
For final judgments, there seems to be no such thing as 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 attorneys. The success of any settlement agreement depends on both sides understanding that settlement is best for both sides.
Most settlement agreements are long and complex, yet they do not have to be. No matter how iron-clad a contact is, it's only as strong as the weaker of both parties signing the contract. Usually, a debtor cheated a creditor in one way or another, which was the cause of the judgment and/or lawsuit.
Settlements are contracts which usually does not mean much, until the payment is successfully completed. If the judgment owner fails to satisfy the judgment, it would allow a debtor to sue them to win a new judgment against the judgment owner.
If a judgment debtor defaults, the creditor gets burned, because they don't get any money, and because the good-faith agreed settlement amount could (arguably) be the new amount the creditor can assert as being owed now, especially in a bankruptcy or appeals court. Some settlement agreements have wordings that state that when the debtor files for bankruptcy protection or defaults, the pre-settlement amount still stands, and is now enforceable.
Sneaky judgment debtors may say they will settle, then sign the settlement agreement, however they do not actually pay their judgment owner. Judgment owners should never satisfy a judgment until a funds clear. It's usually a good idea to meet your judgment debtor at their bank, and witness them get the cashier's check to pay you.
To complete a judgment settlement agreement, the debtor must pay the judgment owner, not pull any shenanigans, and not go bankrupt soon after paying the judgment owner. The creditor needs to satisfy a judgment when payment is secured.
What happens when a creditor is paid, cashes the check, waits until it clears, satisfies a judgment; and then their debtor goes bankrupt? The "weak link" of settlement agreements happens if a judgment debtor pays a creditor, and then files for bankruptcy protection. The usual bankruptcy waiting period is within ninety days after the creditors is paid.
Creating bankruptcy-resistant settlement agreements is not within the scope of this article. Consult with an attorney, and search on the web for "Jerrold S. Kulback How to Bankruptcy-Proof Your Litigation Settlement".
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