Winning a monetary judgment is one thing. Collecting what you are owed is an entirely different matter. There are no guarantees you will be paid even after winning your case. In fact, the risk may be high enough to prompt your attorney to recommend accepting less than what you are owed.
Does that sound smart? That depends on the circumstances. No two monetary judgments are exactly alike. No two judgment debtors present the same level of risk. Judgment creditors, along with their attorneys and collection agencies, must assess each case on its own merits. Some cases will be best resolved by accepting less and moving on.
Reduce the Tension Between Parties
Civil litigation creates tension between plaintiff and defendant. That tension only continues during collection efforts. It can be enough to encourage a debtor to be even more stubborn. A debtor might go so far as to refuse to pay – even though he could – just to guarantee that he ultimately wins.
Offering to accept less is a way to cut through the tension. Consider it an olive branch of sorts. By extending that olive branch, the creditor takes away any legitimate reason for the debtor to stay on the defensive. Both sides can cool down and ultimately work on a viable settlement.
Resolve the Issue More Quickly
Another good reason to accept less than what is owed is a desire to resolve the issue as quickly as possible. For example, reducing the debt by 25% could result in a number that fits the debtor’s budget. He would be willing to pay that amount right away. Many judgment creditors would call that a win.
On the other hand, demanding full payment along with interest and fees could also mean having to enter an installment plan with the debtor. Instead of resolving the issue right away, the creditor is left collecting monthly payments for years. He might still be collecting on a debt long after he has forgotten what the original dispute was over.
Save Money on Collection Costs
Judgment creditors need to pay attention to the amount of money they spend on collection efforts. Every dollar spent ultimately reduces the value of the amount collected. Spending too much money on collection efforts could turn out to be a money losing proposition.
Let’s say a judgment creditor estimates spending $1,000 to collect a $5,000 debt. One-quarter of what he collects will be tied up in collection costs. What if he could spend no money by offering to settle for $4,000 instead? He nets the exact same amount of money but without having to put the time and effort into collection.
Accepting less becomes extremely attractive when a judgment creditor is looking at high collection costs. Believe it or not, collection agencies like Salt Lake City’s Judgment Collectors consider this very thing before taking on a new case. If collection costs are too high compared to what they stand to receive, taking the case probably isn’t worth it.
Maintain a Good Reputation
Lastly, pursuing judgment debtors aggressively can hurt an organization’s reputation. On the other hand, offering to settle for less in exchange for quick resolution can improve organizational reputation. In the long run, the monetary value of maintaining a good reputation could exceed the amount sacrificed by accepting less.
Accepting less than what is owed is an option worth considering. A judgment creditor might find that accepting less pays off more in the long run than demanding full payment. Of course, each case is different. Judgments need to be considered based on their own merits.
