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Winning a monetary award in a civil court case turns a plaintiff into a creditor. Also known as the judgment creditor, this individual or business assumes the role of debt collector after winning. One way to get things settled as quickly as possible is to accept a lesser amount in exchange for immediate payment.
In my years of researching and writing on debt collection, I have run across plenty of judgment creditors unwilling to accept a lesser amount because they saw it as admitting defeat. They chose to pursue their debtors for as long as possible to get the full amount.
Pursuing every last penny is certainly one of the options open to any creditor. A creditor has a legal right to the full amount awarded in court. But there are times when creditors need to look at things pragmatically. There are times when accepting less is the smarter way to go. And under such circumstances, doing so is by no means admitting defeat. It is actually admitting that you have a bit of common sense.
Something Rather Than Nothing
The top reason for accepting less than the full amount is avoiding the risk of getting nothing at all. Think of it this way: would you rather accept 50% of a $10,000 debt or take the risk of pursuing a debtor for 5-6 years and ultimately getting nothing at all?
Judgment creditors really need to stop and assess how realistic full payment actually is. If the chances of getting full payment are pretty good, pursuing every last penny is reasonable. But if the chances are relatively poor, perhaps it’s better to accept whatever a creditor can immediately get following the court case.
Reasons to Consider Settling
For the record, accepting a lesser amount in exchange for immediate payment is a form of settlement. Why would a creditor agree to settle? There are several possibilities:
1. A Judgment Proof Debtor
The first and most common scenario involves a judgment proof debtor. A judgment proof debtor is a debtor who has insufficient income and savings to make garnishment worthwhile. He also has no valuable assets nor any realistic prospects for the future. Trying to collect the full amount would be like getting blood from a stone.
2. Limited Benefits From Garnishment
Another scenario involves a debtor whose wages and bank accounts could be garnished, but the little amount gained from garnishment would mean waiting several years for the debt to be fully paid. Some creditors simply do not want to keep track of payments for that long. They would rather accept a lesser amount and put it behind them.
3. Financial Concerns
Some creditors choose to accept a lesser amount because they have their own financial concerns. A creditor might need cash, for instance. It is better to accept a lesser amount and get the cash today then wait a few years and get more.
Pragmatism Is Not Defeat
The reality of judgment collection is that it is rarely a short process. Even creditors hooking up with collection specialists like Salt Lake City’s Judgment Collectors can wait quite a long time to get paid. The fact is that there are never any guarantees in the judgment collection game.
Pragmatism sometimes dictates that it is better to take a lesser amount in exchange for getting immediate payment. Under such circumstances, pragmatism is not defeat. It is understanding the realities of the situation and making a decision to get the maximum amount while simultaneously minimizing risk. Think about it if you are in the early stages of collecting a judgment.
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