What Are the Benefits of Selling Your Judgment?

Selling your judgment offers several benefits for creditors:

1. Immediate Cash Liquidity: By selling their judgment, creditors can quickly obtain cash for an otherwise uncertain and potentially uncollectible account. With a 4-step process, selling a judgment eliminates the risk of delays in receiving payments from a prolonged enforcement action. Selling your judgment allows you the creditor access to needed funds promptly.

2. Elimination of Recovery Risk: Creditors often face low or no recovery from a judgment. When you sell your judgment, you secure a definite recovery. Selling your judgment avoids the uncertainty of receiving little or nothing after collection and legal expenses are paid. There are at least three kinds of risk to consider when selling and buying judgments.

3. Elimination of Consideration Risk: Judgment debtors may offer alternative forms of payment, such as promissory notes or stock equity, which can be difficult and time-consuming to liquidate into cash. When you sell your judgment, you eliminate this risk, ensuring creditors receive immediate cash instead.

4. Reduction of Time and Costs: Participating in judgment enforcement involves significant paperwork, correspondence, and legal expenses. By selling your judgment, creditors can avoid the time, money, and resources expended in navigating the complex judgment enforcement proceedings.

5. Benefit from Tax Savings: Creditors can benefit from tax deductions when selling their judgment, particularly if the amount received is less than the original income reported. This immediate tax advantage is not available to creditors who remain in collection proceedings and receive payouts over time.

Overall, selling your judgment provides creditors with valuable advantages, including cash liquidity, risk mitigation, and cost savings, allowing them to focus on their lives and financial stability.

Who’s Involved When a Judgment is Sold?

The judgment sale process involves two main parties: the buyer and the seller. The seller is the creditor who wants to trade their uncollected judgment against debtor to a judgment buyer in a court case. The buyer is typically a judgment acquisition firm, which purchases the creditor’s rights and ownership.

Buyers can vary in type and size, ranging from hedge funds, private investment companies, to individual investors. Rarely, a judgment brokerage or related company may act as an intermediary to facilitate the transaction. Our judgment collection blog offers more information about this process, along with this deeper dive into selling a judgment.

Other parties involved in the judgment sale process may include legal and financial advisors. Legal and financial advisors assist in negotiating and finalizing the transaction, assess judgment value, perform due diligence, and ensure all parties reach a contractual agreement.

The court is responsible only for officially recording the ownership transfer of the judgment. The court does not oversee the specific details of the judgment sale itself.

How Does the Judgment Sale Process Work Today?

The judgment sale involves several steps that allow creditors to sell their judgments to interested buyers. Here is a summary of the process:

1. Creditor contacts a Buyer: Oftentimes judgment creditors will seek buyers of their judgments. They may use the Internet to search for firms that buy judgments

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2. Buyer Contacts the Creditor: Buyers interested in purchasing the claim may reach out to the creditor, expressing their interest in the transaction. Buyers may search through court records and other public records to find uncollected judgments.

3. Providing Additional Documentation: Upon receiving an offer, the creditor provides additional documentation to support the validity and value of their judgment.

4. Buyer Performs Due Diligence: Buyers conduct due diligence on the judgment and the debtor’s financial situation to assess the risks and potential returns.

5. Buyer Makes an Offer: The buyer presents a formal purchase offer to the creditor, with the price depending on the judgment details and case developments.

6. Creditor Accepts the Purchase Offer: After reviewing the offer and seeking legal and financial advice, the creditor formally accepts the offer.

7. Trade Confirmation: The buyer sends the creditor a trade confirmation, documenting the material terms of the agreed-upon sale, including the transaction details and purchase price.

8. Assignment of Judgment Agreement: Both parties sign an “assignment of judgment” agreement, outlining the terms and conditions of the sale.  In some cases a buyer will move right to an assignment agreement and skip the trade confirmation step entirely.

9. Buyer Sends Payment: The buyer sends payment to the creditor, and the judgment ownership may change before the court processes the Acknowledgment of Assignment of Judgment. Cash payment is typically given to the creditor at the signing table.

10. Buyer Files an Acknowledgment of Assignment of Judgment: The buyer files an Acknowledgment of Assignment of Judgment with the court to officially transfer ownership of the judgment to the buyer.

11. Buyer Becomes the New “Creditor”: Once the judgment transfer is complete, the buyer is listed as the new “creditor” in the case, and the former creditor is no longer involved, except in specific agreed-upon circumstances.

The judgment sale process is straightforward, though it may vary slightly from one trade to another. Creditors should carefully review the terms of the agreement and may wish to seek professional advice to ensure a successful and secure transaction.