Can a judgment be negotiated or, as they say, has that train left the station? A judgment can be negotiated in Texas, and a debtor can agree to settle a judgment debt for less even after it has been handed down by a court. To a creditor, some money, even if a small amount, is better than no money, or the potential bankruptcy of the debtor (which is frequently as good as no money).
Often, attorneys for debtors will work with creditors as tactical negotiators to reduce a debt payment on outstanding judgments or to design payments that are more manageable.
The number one objective is to get any agreement in writing before a debtor begins making any payments to a creditor. This protects both parties and sets up clear requirements for both until the debt is repaid, such as the amount of each payment, the frequency of payments, the date of each payment, and the method of each payment.
Make sure the agreement spells out these and other crucial terms of the settlement. Once the final payment is made, the debtor should file a Satisfaction of Judgment, which is a public document indicating that the matter has been closed.
How to Settle a Judgment in Texas
It is better to settle a debt before judgment if possible, while the parties are still in control of the terms of their settlement. The fact that a creditor went through the trouble and expense to sue a debtor means they think the debtor has income or assets worth pursuing. On top of that, after the rendering of a judgment, a creditor has added attorneys’ fees and court costs to the amount already owed. This makes collecting a judgment in Texas from the already-burdened debtor even harder.
Therefore, it’s preferable – often for both sides – to work with an attorney to negotiate a discounted debt, in return for a lump-sum payment.
If a large payment isn’t financially possible, a stipulated judgment allows the debtor to pay in monthly installments, shielding the debtor from garnishment, levies, and liens on the debtor’s property. The creditor also benefits from the security of knowing that payments will be routine, and the creditor will not have to aggressively pursue the debtor’s assets (which can be additionally costly and time-consuming).
For example, seizing a debtor’s car requires hiring a towing service, potentially storing the vehicle, and usually the help of a judgment liens lawyer in Houston.
But what if the judgment has already occurred? Can you settle a judgment for less? The answer is yes, and we outline the steps that your Houston judgment defense attorney can take in helping you settle you a judgment below.
1. Review the Judgment
The first step is to carefully review the judgment, which is essentially a Texas court order. If you do not have a copy of the judgment, you can in most cases contact the county where the judgment was rendered or contact the court itself. Debtors and creditors should both review the court judgment to determine the total amount due and any specific payment instructions ordered by the court.
2. Evaluate Your Financial Situation
The second step is to evaluate your financial situation. Whether you are the creditor or the debtor, you should review your finances before negotiating the amount of debt. Feel free to use our judgment interest calculator to help approximate the total fees you will owe.
If you are the creditor and need money right away, you might be more willing to accept a smaller amount to settle the debt quickly instead of receiving protracted monthly payments extended over a long period of time.
If you are the debtor, you need to determine whether you can pay the full amount of the judgment upfront, or whether you need to try to negotiate away some of the debt and/or make a payment plan.
There is leverage on both sides of the table, which a skilled attorney can help use as part of debt settlement negotiations. From the creditor side, the creditor has a variety of methods post-judgment for collecting the judgment debt, including garnishing wages, securing a lien against the debtor’s home, and seizing funds in bank accounts.
The debtor, on the hand, can file for bankruptcy, which generally means that it will be a long time before the creditor sees any money if the federal bankruptcy court does not discharge the debt entirely.
3. Contact Other Party
The third step is to contact the other party. This is where having an attorney is critically important, as attorneys take positions to support the best interests of their clients every day. Your attorney will begin by letting the other side know that you are interested in settling the judgment and making either an offer (debtor) or a demand (creditor).
As a practice pointer for negotiations, it is recommended for creditor attorneys to start with the full amount of the judgment, while debtors should start with a reasonable “lowball” offer. If you’re the debtor, remember, this is not the time for pride. It is normal, wise even, to be honest about your hardship circumstances. If you had the money, you probably would not have ended up in this situation, and the creditor knows this.
Judgment settlement negotiations may take several phone calls, and either side will likely have questions for the other. This is another reason it is important to have an attorney since attorneys know what facts to reveal and what facts to hold back to strongly advocate the positions of their clients. Lawyers can also help with post-judgment discovery in Texas, which is a legal means of getting important questions answered.
4. Put Settlement in Writing
Put your settlement in writing. At a minimum, the debtor should type up the terms of the settlement in a letter and send it to the creditor along with the first payment. That letter should include an affirmative statement that the first payment is in conformity with the agreed settlement.
The best option is to write a settlement agreement and have it signed by both parties prior to any payments being made. Key terms for the settlement agreement include:
- 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 if 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.
The debtor must follow the terms of the repayment exactly as drafted, and either send or have the payment automatically wired on the agreed-upon date.
5. File Satisfaction of Judgment
Once the final payment has been made, one of the two parties should file a Satisfaction of Judgment with the Texas Court. Once this document has been filed, it is recommended for debtors to update their credit reports.
To do this, obtain three certified copies of the Satisfaction of Judgment from the court clerk (you may have to pay a fee). Mail a copy to each of the three credit reporting agencies: Equifax, Experian, and TransUnion. The credit report will soon show that the judgment is “satisfied,” though the judgment will remain on the credit report for seven (7) years.
Let Attorney Seth Kretzer Help with Your Judgment Settlement
If you are trying to settle a judgment as a creditor or debtor, you will need a lawyer with specific experience on judgments in Texas and who has the right knowledge and resources to help you.
Contact the Law Offices of Seth Kretzer online today to schedule a free consultation.
Seth is on your side and knows how to pursue justice on your behalf. Additionally, he has worked Texas judgment settlement cases, and will do everything in his power to help you!