Settlement of Judgment Offer

[PoorGrammyinBK7]

Anyone got a letter from a collection attorney offering to settle a money judgment? Is it the same as "satisfaction" of judgment? Do BK attorneys ever negotiate down for you - that is if you have not filed yet?

We got one today - impossible to do b/c deadline is Monday. They want a lump sum payment of $25K (on a $100K Judgment that is the main reason we are filing BK). Obviously we don't have that, but we do still have credit and could take a cash advance on a couple CC's and pay it (although it is 4-5 times what a BK would cost).

With otherwise good credit, I am wondering if we should consider this - or try to negotiate it down to avoid BK. But then, maybe its a trick - these people have been really sneaky and dishonest in many of their dealings and I don't trust them.

Would it be worth it to not have to go thru BK if this were possible?

I think I am gonna give him our BK lawyers name and number (if he says its ok) and see if they want to negotiate.

[PoorGrammyinBK7]

Payments would be difficult, (would have to get a second job) but I think we could do it, unless something happened like the loss of job or big medical bills or something. If that happened, could we still do a BK then or would having done this hurt a future BK - say a year or two from now - if we should fall on even harder times?

[momof5]

Aren't judgements issued by the court? I would have to wonder if paying less on a judgement is really going to make a difference as far as how much your really owe.

I also think that you have pretty much answered your own question. The 'what ifs' ....do you really want to send this creditor $25,000 only to eventually or even possibly file anyways?

[PoorGrammyinBK7]

The thing is, without the judgement, we would not even be thinking of filing BK! We only have around $1000 in CC debt and are current - well - we are late on one now, because we did not pay it, thinking we have no choice now but to BK, but could pay it and would be only 30 days late.

On our cars, we owe about what they are worth. Same with the house (only because of the recent drop in value of the RE market - this may change in a couple of years).

This judgment is like 95% of the debt we would be filing on. Its impossible to pay and we don't want it hanging over our heads forever.

I was just thinking maybe we should consider it to save our credit - for a while anyway - and maybe for always.

We are nearly 60 yrs old and from what I have read here (and already experienced personally) BK is very draining emotionally and physically.

There is a very good chance we would NEVER have to file BK if we could actually settle it - especially if we could negotiate it down some.

Believe me, I hate to settle, because much of this guy's lawsuit was based on fraud (on his part), but maybe we would be better off than going through the whole BK thing.

But that deadline - not possible.

[momof5]

My biggest fear for you is that you pay this $25,000 but the legal amount owed will still be the judgement made by the court of $100,000. I cannot imagine it coming off your credit report either. If it is legit, will you have to pay taxes? So many things to think about.

Maybe someone else knows more about judgements than I do though. So hopefully they will come along soon.

[PoorGrammyinBK7]

I am sure the judgment would stay on the credit report, but it also says they would accept this "in full settlement of the judgment".

My husband has been trying to contact our BK lawyer and faxed him a copy of the letter. But I am thinking he might not be motivated to have it settled outside of BK - so just wanted to bring up the subject on here to see if anyone has settled a large debt?

[woeisme]

If they do take a settlement for 25K and somehow then get the judgment cleared up, you would still owe taxes on the 75K that they "forgave". Not sure what your tax bracket is right now, but in addition to the 25K you'd be working a second job to pay off on the credit card balance transfer, you'd also need to come up with another 15-25K for your tax liability on the 75K they forgave. That is if they actually then clear the judgment. If they still try to go after you for the remainder, you're going to have a big cash advance on your record that may cause problems with your BK that you'll have to file at that point.... I'd see what your lawyer thinks, but I don't know that you are going to come out any better than you would in BK, and might very well just be postponing the BK and getting your life back on track.

[PoorGrammyinBK7]

Looks like you are right woeisme.

I had heard there were exceptions to the tax question but they would not do us any good it looks like, from some reading online today...

Seems so unfair - it was not like actual money we got from credit cards or loans or anything. Its too bad something like this has to force us to BK.

[keepmine]

Everything on earth is negoiable. The judgment holder is prefectly free to accept less than the judgment amount since, they own the judgment.
If $25K is the first offer, you likely can settle this for $20K or less. The judgment holder is well aware that something like 2/3's of all judgments are never collected. The higher the amount, the less likely you'll get anything. Look at OJ for example.
Several points to consider. As woeisme pointed out, there could be a tax liability.If you're insolvent, that won't be an issue. IRS form 982 will meed to be filed if you get a 1099C. Your accountant can advise you on the tax issuse.
Just get any agreement in writing. The contract should include language that the settlement precludes the judment creditor from selling, transfering or assigning the unsettled portion of the debt and, they must file a satisfaction of judgment with the court within 20 days of the receipt of the funds.

All things being equal, if this represents 90% of your debt, I'd pursue it with the above caveats in mind.

[keepmine]

Don't understand why lawyer says do a 13, but we will follow his advice I guess, possibly converting to a 7 later on -- if need be... How I dread this......

Don't do this unless, you understand exactly what's going on. Your lawyer workd for you. You have every right to demand an explanation that is understandable.

[AngelinaCatHub]

Grammy, don't do it. If you are in bk or about to be, it is preferential. Talk to bk lawyer, you may just scrap the Judgment. BE real careful. 'Hub

P.S. paricularly on a weekend with a Monday deadline. OLD PLOY.

[CindyLou]

Taking cash advances on credit cards almost never ends up positive. Have you dont the math on how much your payment will be on 25,000 at at least 19% interest? (and that's probably a low estimate!)

Plus if the debt is business then a chapter 7 is possible regardless of your situation, I believe.

I don't know all of the details of your case, but just from what I know I would say go ahead with the bk and be done with it for good!!! Otherwise, 5-10 years from now you'll still have the majority of this debt left.

That's my 2 cents....good luck and keep us posted.

cindy