How to Settle Judgments Without Bankruptcy

A judgment is a court-issued order for you to pay back money you owe to a creditor. Because it costs money for a creditor to file a lawsuit and get a legal judgment against you, many creditors will pursue other means of collection first. Typically, a judgment comes after months of phone calls, letters and other attempts to collect on your outstanding debt. While a bankruptcy can usually protect you from the enforcement of a judgment, there are other means to settle your judgment before bankruptcy, although you have limited your options if you wait until the judgment is approved.

Instructions

1

Pay your debt. Once you have a judgment against you, your creditor can take more aggressive action than just calling and harassing you. Typically, the court allows a creditor with a judgment to place a lien against your property, garnish your wages and possibly seize your property. If you have the money, you can pay off the judgment and avoid all of these. You also can avoid bankruptcy. Although the judgment will still appear on your credit report, at least you can have the notation that you paid your accounts in full, rather than having them discharged in bankruptcy.

2

Negotiate with your creditor. Generally speaking, your time for negotiation has passed once the court grants a judgment. Creditors are more likely to negotiate your debt down before a judgment to avoid the expense and hassle of filing a lawsuit, which can be expensive. However, once the judgment is in effect, your creditor has the legal backing of the court system to do whatever it can to collect on the outstanding debt. Because your creditor has the authority to compel you to pay in full, negotiations for a smaller amount are less likely. However, if you can somehow demonstrate to your creditor that you are unlikely to be able to pay the full amount of the judgment, it is possible your creditor will consider releasing the judgment for an upfront payment.

3

Wait it out. It is theoretically possible, although unlikely, that you can wait out your judgment and never pay it. Most states impose a statute of limitations on how long a creditor can attempt to collect a debt, and if that time limit expires, you are no longer subject to the judgment. However, the statute of limitations in many states, including California, is 10 years, and most courts allow creditors to renew judgments for an additional 10 years. However, it is possible that if you cannot pay your judgment, it will ultimately expire.