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How to Settle Credit Card Debt with a Judgment

How to Settle Credit Card Debt with a Judgment

One of my credit cards I fell behind with sued me and has a judgment.

Can you settle credit card judgements like other debts

—Stressed

The short answer to your question is – YES! CRN does assist in settling debts like credit cards where there was a lawsuit and then a judgment entered against you. Settlements can be negotiated at all stages of the collection cycle.

There are challenges to settling credit card debts that have reached the lawsuit and judgment stage. Before I address the challenges, I want to point out that the best time to settle credit card debts is before a lawsuit is filed, and even before the account is placed with a debt collection attorney.

Watch my brief video about some of the differences between settling credit card debts with your bank and debt collectors compared to negotiating with collection attorneys whether they have a judgment or not.

While this may not be instructive to your judgment debt, you may have additional credit card debts that have gone unpaid and I want you to be aware of the following:

  • Settling a debt with your original creditor (the bank you had the credit card with) after having missed a few payments is not only possible, but in your best interest. In fact, reaching settlement early will often achieve the best savings result when negotiating is done correctly.
  • You may end up with credit cards that are charged off and placed with outside collection companies. This is the next best (sometimes the best) opportunity to settle a credit card account you could no longer afford to keep payments current.
  • If your overdue credit card account lands in a collection attorney’s office, you can still settle the debt before any court action is filed, or at a minimum, negotiate favorable payment terms.

There is a science to navigating the collection stages I briefly outlined above. Timing, balances, who your credit card debts are owed to, and your ability to come up with the money needed to settle the debts – all will affect the strategic design of which account to settle with first, second, third etc…. It is important to have a plan to follow if you want to systematically and successfully settle debts and save the most money in the process. CRN is excellent in assisting people in this regard.

If you want to learn about how to settle your debts no matter what stage of collection you are in, we have a ton of resource pages to help you. I recommend starting at the beginning of my debt settlement section.

If you are floating out there with several unpaid credit card accounts with no real financial resources to handle the situation, or a plan for doing so, you owe it to yourself to learn if you would be better off filing for chapter 7 or chapter 13 bankruptcy before a lawsuit is filed, or now that a judgment exists. You can consult with a bankruptcy attorney for free. I recommend talking with more than one.

Collecting on credit card judgments can be challenging too.

The primary ingredient found in any debt settlement recipe, whether there is a judgment or not is… money. If you have enough of this ingredient you need to be aware of a few things.

A judgment is just a piece of paper. It’s the court sponsored enforcement of that piece of paper that is the problem. You could end up with liens placed against your real property, your bank account levied and wages garnished directly from your employer. There are even instances where a sheriff can show up to take a look around at your “stuff” and inventory personal items that can be taken to satisfy a judgment (this happens, but relatively rarely).

Can I still settle my credit card debt if I have a judgment?

Judgment debt, whether past due credit card bills, personal loans, medical bills and other debts, are easier to negotiate and settle while maximizing your percentage of savings results if:

  • A bank account to levy cannot be found because one in your name does not exist, or does exist but is maintained with little money in it;
  • If a W-2 wage source cannot be located to garnish and;
  • Where there is no real property lien, or where the lien is filed, but has been in place for some time and remains unpaid.

The one thing you can control is whether you have a bank account with your name attached. If you do keep a bank account open, realize most bank levies are attempted at the beginning, middle and end of the month – when you are most likely to have deposited a pay check, or other money to cover bills.

If you have sources of funds electronically deposited, you may want to elect to have paper checks issued to you until the credit card judgment debt is resolved.

The lien on property will generally not involve forcing the sale of the property in order to satisfy the judgment. You should look to resolve the judgment prior to selling the home (negotiate a settlement before listing if possible), or refinancing (settling before a lender does a hard credit pull is often best).

Wage garnishment is a major concern. Once your wages are attached the creditor has little reason to work with you at resolving the debt for less because they will continue to get paid unless:

  • You prove you meet garnishment exemptions in your state
  • You leave that job
  • You satisfy the judgment

Warning: Your credit card judgment debt grows from interest and can often be renewed!

Interest is accumulated at the rate set by the court, or the maximum allowed by law in your state for judgment debt. While you may be able to be creative in how you avoid paying the judgment you must realize that the balance of the judgment is likely increasing.

If you are struggling with overdue bills and other expenses and are unable to come up with a plan to get rid of the judgment or lawsuit through a negotiated settlement or payment terms you can afford, the fact that the debt is increasing should concern you. Stop and consider what your options to resolve the credit card judgment will look like next year. The year after that.

Judgments do have a “best collected by” date, but can be renewed. Judgments have a shelf life with a time frame specific to your state. Most states allow for a judgment to be renewed prior to expiration. For many, this is a ten year time line and renewal allows for an additional 10 years. That’s a 20 year shelf life!

Identify all resources you can tap to fund a settlement offer or payment plan successfully. If you cannot reasonably come up with the money to settle the debt, or make payments after reaching agreeable terms, look to bankruptcy to stop a bank levy, wage garnishment or lien on property.

Those are the unfortunate realities.

I highly recommend anyone with a judgment, that needs to be resolved in order to buy or refinance your home, to watch this video interview I had with a former debt collector: https://youtube/QpdDks73QUw

It is always best to put a plan together to address delinquent debts before a judgment becomes the concern and you are forced into crisis mode. If you have other debts, you can still put a plan together that includes resolving the judgment too, but it is important to not waste any time in doing so.

Need some personalized help?

If you would like confidential help you can…

  • ask a quick question here
  • request a general debt consultation here
  • get a settlement estimate here
  • use the CRN Platform to settle your debts or find dedicated Debt Coach here

Not sure where to start? Click on the big blue “Get Debt Help” button.

Filed Under: debt collection, Debt Questions, debt settlement

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About Michael Bovee

Michael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.

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Comments

  1. Isaac says

    May 2, 2022 at 12:39 pm

    I have a judgment against me for credit card, I received a letter from the attorney with a questionnaire of where i work, live Etc. they ask that I send it back within 7 days or it will be punishably as contempt of court, am I required to send back these questionnaire to them?
    I’m just trying to win some time to decide the which route to take

    Reply
    • Michael Bovee says

      May 2, 2022 at 1:23 pm

      Some of these things are compulsory. It sounds like yours is given the threat of contempt.
      I would talk this over with an experienced debt collection consumer law attorney in your state.

      Reply
  2. Michael says

    April 20, 2022 at 11:43 am

    So let’s say I have already had a hard credit pull to refinance our house. We were hoping to pay off all our credit cards and have a bit leftover to put into the house to rent it. Anyway there are some judgements from credit card companies to the tune of 38K, roughly our current credit card debt. I called the 1st firm and was surprised that they really hardballed me and would not offer me less than a 10% discount. I did not tell them I was refinancing but perhaps they can see that from the hard pull? Any advice on how to move forward?

    Reply
    • Michael Bovee says

      April 20, 2022 at 1:33 pm

      Most collectors have and use real time access to your credit reports. They know they are in the way of your goal, and if you want to sell or refinance, they are set to get paid.
      Even if they did not see it, judgment debts with property liens are tough to negotiate decent settlements.
      I have to wear these down over time in order to get twenty percent off.
      I helped a woman who got her judgment settlement last month, and her refinance done last week, with an extraordinary judgment lien settlement. But she is on a fixed income with no other assets, and the place was in need of many repairs.
      Your welcome to schedule a call with me and talk through strategy.

      Reply
  3. hero says

    March 11, 2022 at 4:05 pm

    Hi Mike,

    If medical debt goes to a collection agency, at what point is it best to pay it off? how do we minimize harm, and maximize the amount of money saved during the process of wrapping things up?

    thanks,

    Reply
    • Michael Bovee says

      March 13, 2022 at 5:57 am

      Check out my video about settling medical bills for less.
      If the account is not more than 6 months late, I would try not to let it get that far if you can avoid it.

      Reply
  4. Hero says

    March 11, 2022 at 4:03 pm

    Hi Mike, Hi Everyone –

    *URGENT* request for help!

    Someone in a fictional story had a credit card. this hero paid off monthly charges in full for 15 years. the hero got sick, stopped working, etc., couldn’t pay for a few months. (literally, like less than five months.) The evil antagonist company, let’s call it “Chase,” said it “closed the account.” the hero was so sick he wasn’t reading the letters for awhile. then the evil company said that it had already stole from the hero, and the hero could do nothing about that. the evil company stole thousands of dollars in rewards points.
    the hero valiantly calls and e-mails every month, saying “let’s finish this. i’ll pay in full wha i owe now. let’s use the points — they were promised. and no, i don’t believe all that interest is fair — i wanted to pay what i owed. Chase refused.”

    everytime Hero called, chase said it did not empower its people to allow use of the stolen points, as the account had been “closed.”
    hero has contacted Experian; hero contacted CFPB; hero contacted the many gods in this universe.
    all the while, Chase has kept adding interest — even though the hero wanted to pay (in part by using the rewards points the hero had accumulated through many years of use.)

    now Chase says it will settle. on the phone, Chase said, “how much could you settle for?” The hero naively said, “[70%] of what Chase says the hero owes (including the unjust interest).

    the hero believes Chase would have settled for less. what do you think, $500?

    what does the hero do?! how does the story end well?

    Reply