Negotiating a Money Judgment Payment Plan: What’s in Play

Negotiating a payment plan is one way for two parties in a money judgment to get things settled. A payment plan represents a clean, easy means of addressing the debt so that both parties can get on with their lives. But what is actually involved? What is in play when payment plans are being negotiated?

Attorneys May or May Not Be Involved

The starting point for this discussion is the attorney’s role in negotiating a payment plan. While negotiations are typically left up to attorneys, such is not always the case. An attorney doesn’t have to be involved if either party wants to forgo legal representation.

For example, negotiating a payment plan in a small claims case likely won’t involve attorneys. The amount of money probably wouldn’t cover the attorney’s fees anyway. On the other hand, money judgments involving substantial financial awards are best left to attorneys. They are equipped to work out payment plans that make everyone happy.

A Creditor Has to Be Willing

The wildcard in every payment plan scenario is the creditor. In other words, a creditor needs to be willing to accept installment payments over a prescribed amount of time. An unwilling creditor destroys all hope of negotiating an amenable payment plan. Just like a creditor cannot extract payment from a debtor who genuinely has no money, a debtor cannot force his creditor to accept a payment plan.

The Debtor’s Negotiating Power

Also in play is the debtor’s negotiating power. Salt Lake City-based Judgment Collectors explains it this way: debtors have more negotiating power before going to court. By going to court and losing, the negotiating power is substantially reduced.

According to Judgment Collectors, a money judgment is a legal recognition of a debt along with the debtor’s obligation to pay it. A money judgment gives creditors access to tools that would otherwise be out of reach. It’s all bad news for debtors who now find themselves in a less favorable negotiating position.

The Actual Negotiation Process

The final thing in play is the actual process itself. Generally, it begins with the creditor and debtor both independently assessing the debtor’s ability to pay. Let us say the debtor has sufficient income but no assets of any value. He is a good candidate for a payment plan. But what if he has assets, like non-exempt real estate? The creditor might be unwilling to negotiate.

After assessing the debtor’s finances, the process proceeds as follows:

1. The parties or their attorneys express a mutual willingness to settle the matter.
2. The debtor makes a reasonable offer based on his analysis of financial resources.
3. The creditor either accepts the offer, rejects it, or counters.
4. Negotiations continue back-and-forth until the two parties reach an agreement.

Judgment Collectors says that any such agreement should be written in a formal contract. This is something attorneys would do by default. But if attorneys are not being utilized, it’s in the best interests of both parties to get the agreement in writing.

A Final Word About Negotiating

Negotiating a payment plan tends to favor the debtor whose financial resources are limited. He benefits from being able to get his debt settled without putting too much financial strain on his budget. As for the creditor, a payment plan might not seem like the optimal choice. But if the other choices include the risk of not getting paid at all, negotiating a payment plan suddenly looks attractive.

Now you know what’s in play when negotiating a payment plan following a money judgment. Keep it in mind if you ever find yourself in civil court.