Sell Your Judgment for Cash in 4 Steps
When an original judgment creditor holds a judgment without actively enforcing it, they are effectively speculating that the debtor will voluntarily pay. However, buying a judgment is a conscious decision to participate in the judgment enforcement process. During judgment enforcement, creditors file court motions, communicate with the sheriff and private investigators, and possibly even defend against attempts by the debtor to vacate the judgment. Failure to act in any of these circumstances could have disastrous effects. However, acting on them can be time consuming and expensive because it is almost always done through the retention of counsel.
Who’s Selling, Who’s Buying Judgments
Buyers purchase judgments as an investment opportunity. In most cases, these buyers of judgment enforcement professionals who may either hold the judgment to speculate on a change in the debtor's financial situation, or use their experience and resources to actively enforce the judgment.
The seller’s motivation is to realize an immediate cash payment, eliminate their collections risk, or avoid the time and energy of judgment enforcement.
What is Being Bought and Sold
Obviously, not all judgments are equal. The characteristics of the judgment determine its level of attractiveness to a buyer of judgments. Buying a judgment is more likely with the following characteristics:
Relatively large
Relatively well litigated (not a default judgment)
The debtor owns real estate
The creditor was represented by an attorney
How Buying Judgments Works
Generally, buying and selling judgments is freely allowed and can be of benefit to both the creditor and the judgment buyer.
The following steps outline the typical process involved in selling judgments. Note that the mechanics of buying judgments are not set out in the law and the court is not involved in negotiating or approving the purchase price.
Step 1: The Offer
The judgment selling process usually begins with a buyer offering, in written or verbal form, to purchase a creditor's judgment. Sometimes sellers approach buyers with a request for a cash offer for their judgment. Offers will always be an amount that is a discount to the current balance due on the judgment. Since the balance due may greatly exceed the original judgment amount there have been offers for certain judgments for as high as 100% of the judgment amount, however these are very rare. Typically, an offer of much less is made. The higher the likelihood of a good payout for the judgment, the higher the offer may be.
Step 2: Confirmation
After a price is agreed upon, the judgment sale process can move to an Assignment of Judgment Agreement. Sometimes, first, the seller will be provided with outlines the key terms of the offer, but this is not an actual full contract. This is similar to a letter of intent and generally states that the sale of the judgment is subject to a mutually acceptable Assignment of Judgment Agreement, which is the document that conveys title.
Step 3: Assignment of Judgment Agreement
This document is the full contract which will bind the parties. Key terms include:
Description of the judgment which is being purchased (amount, case number)
Purchase price
Representations and Warranties
Venue
Notably, the Assignment of Judgment Agreement is not required to be filed with the Court. The judgment buyer and seller can be confident about the privacy of their transaction.
Step 4: Evidence of Transfer of Judgment
The Evidence of Transfer is known as an Acknowledgment of Assignment of Judgment and includes information required by statute such as: buyer and seller’s name and address and description of the judgment being transferred. As described above, the key terms of the sale including the purchase price are confidential and not disclosed in this document.
FAQs
Having explored the dynamic landscape of selling your judgment and the entities typically involved, it’s clear that a sale offers substantial benefits for sellers seeking immediate liquidity. Questions may arise about the finer details of these transactions or specific situations that could occur during the assignment process. In the following section, frequently asked questions are addressed to further enhance understanding and prepare participants for a successful sale of their judgment.
Why Does Someone Want to Buy My Judgment?
Buying a judgment is a way for judgment enforcement professionals to speculate on the collection of a given judgment. Buyers of judgments would realize a positive return to the extent collections exceed the purchase price or suffer a loss if collections do not exceed the purchase price. Furthermore, the length of time between buying a judgment and collection can be relevant. For instance, if it takes 5 years for the judgment buyer to collect, it may be a positive return but very low after the cost of money. Judgment buyers also become an active participant in the case.
Should I Sell My Judgment?
Judgment sellers generally don’t want to speculate on the collections outcome or spend the time and money tracking down the debtor, collecting, and potentially defending their judgment. Selling judgments also offers the following advantages:
Escape the risk of delayed recovery of your judgment, given the prolonged nature of judgment enforcement.
Potentially receive a tax deduction if the judgment is sold at a loss.
Minimize legal costs tied to investigation, filing, potential litigation, and the overall expenses associated with navigating and monitoring the time-intensive judgment collection process.
When Can I Sell My Judgment?
Judgments can be sold throughout all stages of a case. However prices can greatly fluctuate based on case developments and changes in the debtor's financial position. Most judgment sales occur after the time for appeal has expired. This can vary from 30 days to 180 days depending on the circumstances of the case.
What Rules Apply to Selling My Judgment?
While there are other methods of selling a judgment, nearly all assignments are made pursuant to he requirements in California Code of Civil Procedure § 673.
Can I Sell My Judgment if the Debtor Disputes it or Refuses to Pay?
Yes. Judgment buyers specialize in collecting judgments against difficult and litigious defendants.
Conclusion
The buying and selling of judgments is specifically provided for in California law. The practice has been ongoing for decades because it is an efficient way for creditors to get immediate liquidity. There can be other benefits as well, such as peace of mind, and freedom from litigation. It is important to understand that the Assignment Agreement is a legally binding contract and it should be read carefully and treated as such.