A Guide to Selling Your Judgment

Collecting a judgment can be time intensive and costly, particularly if you have to retain legal counsel. Judgment collection can also be a stressful distraction from your work and everyday life. Judgment collection is a specialized area of the law with a lot of complexity. Most people, and even many attorneys, aren’t equipped to handle these matters by themselves.

Why should I sell my judgment?

Elimination of Recovery Risk

Judgment creditors are often the last in line to get paid. In many cases, recoveries are low or non-existent after collection expenses (lawyer and other legal fees) and other creditors are satisfied. Selling your judgment for cash allows you to secure a definitive recovery, eliminating the risk of an uncertain outcome.

Immediate Cash Conversion

The average time to collect a judgment is approximately two years from the judgment date, but many cases take far longer due to continued litigation and stalling by the judgment debtor. Selling your judgment for cash eliminates the time risk associated with judgment collection and allows you to get cash immediately to spend today.

Elimination of Consideration Risk

Assuming you can find assets to collect from you may end up with illiquid assets like jewelry, business equipment, automobiles, or real estate. When you sell your judgment for cash, you eliminate the risk of receiving illiquid assets.

Elimination of Time and Cost associated with the Judgment Enforcement

Judgment enforcement involves a great deal of paperwork and correspondence between the Debtor, the court and creditors. In return for selling your judgment for cash, you get back the time, money and valuable resources required to follow and participate in a case from start to finish.

Favorable Tax Benefits

Judgment sellers may be eligible for a tax benefit by applying the loss on the uncollected portion of their judgment against current Income.

Which judgments can be sold?

County court, district court, superior court, and small claims court judgments can all be sold. Labor board awards that have been filed as judgments can also be sold. Judgments include any order for payment by a court of law.

In order to sell your judgment for cash it will need to be a final judgment. This means the period for appeal has passed. This can vary from 30 days to 180 days depending on your particular situation.

The process of selling judgments

The Offer

• Creditors may receive solicitations from judgment buyers to purchase their judgment. Solicitations often take the form of letters, faxes, emails or phone calls. The buyer of the judgment will provide an offer price (expressed as a dollar value or a percentage of the face amount of the judgment) and will describe other key provisions.

• Our offer price for your judgment is based on several factors, including the prospects and expected level of recovery, the estimated time until recovery, the potential for receiving illiquid assets, and our required return. A judgment buyer determines the prospects and expected level of recovery by assessing the debtor’s current and future financial condition, assets, and any pending or threatened litigation against the debtor. Since a lot of information will be unknown, these determinations are often inaccurate or best guesses on the part of the judgment buyer.

The Trade Confirmation Document

• As a first step, sometimes a judgment buyer will send an assignment summary document (similar to a letter of intent) to a prospective seller which outlines the key terms of the purchase and sale, including the purchase price, the judgment to be transferred/assigned and other key terms. This summary can be subject to the buyer’s further due diligence on the judgment (therefore non binding) as well as approval of the purchase and sale agreement (also known as the assignment agreement). Sometimes buyers forego the trade summary document in lieu of sending the complete purchase and sale agreement, which is known as the judgment assignment agreement.

Judgment Assignment Agreement

• The judgment assignment agreement is a binding legal contract between the judgment seller (also known as the assignor or transferor) and the judgment buyer (as known as the assignee or transferee). Usually sellers are most focused on purchase price. In addition to the purchase price, sellers should pay attention to other key terms, including any provision for judgment impairment, seller representations and warranties, and other payment terms.

• Judgment impairment, which is also called disallowance or recourse, is the concept that the judgment is entitled to a purchase price refund for any portion of the judgment that is reduced or expunged. This is very rare and has never happened with our firm. However, judgment buyers are often reluctant to remove the judgment impairment provision without a commensurate reduction in the purchase price to reflect the additional risk assumed by the buyer. 

• Sellers of judgments should also pay close attention to the seller representations and warranties. Typical seller representations and warranties include that the seller owns and has good title to the judgment, that the judgment is valid and has not been overturned, that the seller is authorized to enter into the judgment assignment agreement, that the seller has not sold or assigned the judgment (in whole or in part), and whether the seller has received any payment of the judgment.

• Lastly, sellers should be sure the judgment assignment agreement contains detail on when the agreement becomes effective and how long a buyer has to remit the purchase price to the seller.

Evidence of Transfer of Judgment

• The Evidence of Transfer of Judgment is the Acknowledgment of Assignment of Judgment that is meant for filing with the Court. It discloses the names of the buyer and seller, the amount of the judgment, and other public information. It does not include the purchase price, disallowance provision, representations and warranties, or other keys terms contained in the Assignment of Judgment Agreement.

• The judgment buyer is responsible for filing the Acknowledgment of Assignment of Judgment with the Court. 

• The judgment buyer will also give notice to judgment debtor notifying them of the judgment assignment. The judgment debtor cannot object to the transfer of judgment.

Conclusion

It is important for creditors to take action in collecting their judgment. The court will not do this for you. The first step includes gathering information on the judgment debtors income and assets. The creditor may decide to hire a judgment collection attorney at this stage. The second step is to stay on top of relevant court dates, such as deadlines for filing memorandums of costs and renewing the judgment. Lastly, creditors should begin actively enforcing their judgment through liens, levies, and other enforcement methods. Creditors should keep in mind that choosing to hold the judgment requires them to actively participate in the enforcement.