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
Short answer
Yes, a judgment can still be settled. Settlements can be negotiated at every stage of the collection cycle, but settling before a lawsuit is filed is easier and usually saves more.
Key points on this page
- Settlement is possible at any stage, including after a judgment has been entered.
- The largest savings usually come from settling with the original bank after a few missed payments.
- A judgment is enforced through bank levies, wage garnishment and liens on real property.
- Judgment balances keep growing at the interest rate set by the court, and most states allow a judgment to be renewed, often ten years plus another ten.
- Wage garnishment removes most of a creditor’s reason to negotiate, so act before it starts.
- If you cannot fund a settlement, bankruptcy can stop a levy, a garnishment or a lien.
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).
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.
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About Michael BoveeMichael 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. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
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
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.
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?
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.
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,
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.
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?
How much is the Chase balance today?
Hi Michael
You helped me out a few years ago that resulted in a great outcome. I’m near the end of a mortgage approval and a last step they need more info, shooting for a 4/30/21 closing. This is a first time buyers program in PA. One of those are three judgements against me from AMEX, CapitalOne and Discover totaling $11,669 from 2010 and 2012. I haven’t heard from the lawyer since the inception of the judgement. I have since been rigorously vetted for a mortgage and a government subsidized rental in NYC. Came through with flying colors. My FICO scores have been consistently around 765 and 780 for a few years, credit cards (I know, not much of a marker of financial health). No calls, letters, Sheriffs or garnishments. Nothing showed up on my mortgage broker ‘s radar until this final round of necessary documents by a closer (?) with the brokerage. I truly thought it had been vacated. I am 67 years old and on a fixed income for the most part, no steady stream of income to speak of from anywhere else. I plan on calling the law office to try and settle the debt in a lump sum. Obviously the timing of this is crucial. I need to have done this yesterday. I am going to call tomorrow morning 4/19 so I know I will not be able to benefit from your advice… unless this gets protracted, which is not obviously, good for me. I would really value your input, just in case this gets drawn out.
Settlements on judgments, and when the debt collector can see from your credit reports that you have recently applied for a mortgage, are not great.
You can still try to get some form of a discount, but you have 2 things working against you.
1. The need for speed.
2. The home loan credit pull that shows the debt collector the judgment is in the way of a major goal.
Here is more about negotiating with debt collectors when you need a home loan.
Thanks. I was afraid of that. Here goes.
A confession of judgement has been entered on me.
Who should I repay, the collections company or the lender?
Can I be able to negotiate a settlement?
Will the issue anything in writing about settlement plan?
You typically want to contact the collection law firm to settle the judgment.
If the judgment is old, the law firm may not be involved anymore. In that case you can contact the named plaintiff that sued you.
You should make sure you get any settlement agreement in writing.
I have a judgement in MN with Midland Funding that’s dated Nov 2016, originally I think it MAY have been a Sears card but they were never able to confirm that. Anyway, it was $7k last year, now almost $8k. When I try to contact them they claim I’m giving an incorrect birthdate or social security number…no I’m not. These numbers have never changed, I am very aware of what they are and that they’re correct, but this causes them to hang up or not talk to me. The debt was originally incurred because my child suffered a brain injury late 2012 and we (me & 2 kids) lived off my credit cards for about 1.5 years before getting on housing and other Assisstance. We are still on Assisstance, my son gets SSI, and I work about 10-15 hours per week during the school year. He requires full-time care so I really don’t see my situation changing for many years to come. There is a considerable lack of quality home healthcare workers in our area. They keep trying to garnish wages but they are not high enough and all other income is SSI or county assistance so they can’t touch it, it is what it is. But I just want it taken care of. My fiancé and I would like to buy a house “together”, but I can’t even be on the mortgage with this judgement. And yet I don’t have any idea how to talk to the company much less be able to come to an agreement with them. I was considering using my stimulus check to try and make a deal when it finally comes.
Any advice? I really don’t know what to do. And Midlands deal on their page about working with people during a hardship has not proven to be accurate for me at least. I told them I could send documentation from my sons specialists, county workers and other Drs as well, (this was 3-4 years ago) but they were rude, insisting at that time that I had to pay in full, and then sued without me even knowing that it was taking place until after it was approved, which it was due to me not showing up. I’m very frustrated and few stuck.
Who is the collection law firm that handled this for Midland?
Are you able to com up with 50 to 80 percent of the judgment balance?
Judgments rarely settle well, and often regardless of the hardship.
Midland debts that reach the courts are probably at the most inflexible I have seen them for as long as they have existed, and that is in the COVID reality. Perhaps it will soften in the near future.
I had a judgment filed against me after a year of going to small claims court. The judge kept telling the creditor to produce some proof of debt, (which I was never presented with) but then changed her mind and said that the fact that I was paying the card was enough. I was not given the opportunity to defend myself in a trial. I missed the pre-trial meeting, but only because I had to drive 9 hours to get to the court. Then I received a judgement, which I contested, and it was denied. Any advice please. It is for $2,900.00 but I know there are other creditors that will probably follow … I ended up in serious debt after my son was diagnosed with Autism and I had to quit my job. I do not see things getting better, however, if I could settle some amount it will probably be better than having my car taken from me. We do own a house, I do not have an income but my husband does, we are financially just going down the rabbit hole and things are only getting worse. Please advise.
How much do all of your unsecured debts add up to?
I have a judgement against me by HSBC. when I googled HSBC they ceased to exist in 2013 after a settlement with
OCC related to Legacy Credit Card add-on Products.
is this judgement still legal
I had an agreement for a payment plan was paying ,and told did not need to show in court. Would be an agreed judgement.. Then it was filed as a different judgement. I have not missed any payments and I received a letter stating a lein would be placed. This is a credit card debt. I do not have resources to settle the debt.
hello. I have total of 4 judgements totally about 150k. I am trying to settle for 10-15%. I also have a restitution for 440k. You think it is possible to settle the judgements?
You can settle judgment debts, but getting under 50% is not common at all.
With this much at stake, have you looked into whether you qualify for chapter 7 bankruptcy?
I need help. I want to settle my judgements and debt. I am lying on them but I wish to try to settle for less.
You can click on the get debt help tab in the upper right corner and complete your user profile. Once completed, schedule a call with me when prompted by the app. I can go over options and strategy with you on that call.
I have a lawsuit that I was just served by a law firm on behalf of Calvary for a Citi card for $7900. Should I file an answer for proof that I owe money to Calvary etc? Will this drag out the suit? Will I me required to go to court? Would it ruin my chances of settlement if they can prove something?
Is your goal to fight the suit and try to get it dismissed? Are you prepared to make that effort on your own, or would you like to work with a skilled debt collection defense attorney?
my niece has a judgement against her and they keep adding judgements constantly. she has tried to make payment arrangements but what she offers to pay each month is unexceptionable to them. they tell her what she HAS to pay and her job pay and living costs won’t allow that amount. what can she do?
How much is the judgment for?
How much does all of her unsecured debts add up to?