If you fail to repay a creditor, it can initiate a civil lawsuit against you to collect the debt. Upon winning a judgment, the creditor can then pursue additional actions, such as wage or bank account garnishment, to recover the money. If a judgment has been entered against you, you may consider proposing a payment arrangement if you wish to avoid garnishment actions or judicial liens.
Determining Payment Amount
Before you can negotiate a payment arrangement with your creditor, you must determine how much you can afford to pay and how much time you'll need to pay off the debt. Make a list of all your regular monthly expenses as well as any irregular expenses that may occur, such as semiannual car insurance payments or property tax assessments. Compare the expenses to your income to determine how much you can afford to pay each month. If you plan to offer a settlement in lieu of full payment, determine the percentage of the total balance due you can pay based on your available cash.
Contacting the Creditor
Once you've determined the amount you can offer the creditor, contact a representative via telephone or mail. Present the creditor with the amount you can pay and the number of months you plan to make payments. Ideally, you want to provide the creditor with one or more reasons why agreeing to a payment plan will be beneficial. For example, if you lack sufficient funds to satisfy a bank account garnishment or if your wages fall below the minimum amount required to execute a wage garnishment. If the creditor consents, request the details of the agreement in writing before handing over your first payment.
Judicial Payment Arrangements
If your creditor refuses to accept your offer for a payment arrangement or settlement, you may petition the court to grant your request. The process for requesting a payment arrangement varies based on state law, but generally you must file a motion with the court to pay in installments. Along with the motion, you must provide a statement attesting to your current financial situation. Your creditor will have an opportunity to respond to the motion and propose a different payment arrangement. A court hearing will be scheduled at which time a judge will determine whether to grant your motion.
Even if your creditor makes no attempt to enforce the judgment when it's filed, this doesn't bar it from doing so in the future. Each state allows creditors to renew judgments, which allows them an extended period of time to collect. If you cannot negotiate a payment arrangement directly with the creditor or you're financially unable to make any type of payment, you may consider filing for bankruptcy. While filing for bankruptcy can be damaging to your credit, it can allow you to eliminate your debts, including outstanding judgments.
- California Courts: Paying the Judgment
- Nolo: Paying the Judgment
- MFY Legal Services: How Do I Negotiate a Settlement in a Debt Case?
- Consumer Financial Protection Bureau. "What Is a Garnishment?" Accessed June 8, 2020.
- Federal Student Aid. "Collections." Accessed June 8, 2020.
- Nolo. "How to Object to a Wage Garnishment." Accessed June 8, 2020.
- Federal Trade Commission. "Debt Collection FAQs." Accessed June 8, 2020.
- Federal Trade Commission. "Settling Credit Card Debt." Accessed June 8, 2020.
- Justia. "Wage Garnishment and Bankruptcy." Accessed June 8, 2020.
Rebecca Lake is a freelance writer and virtual assistant living in the southeast. She has been writing professionally since 2009 for various websites. Lake received her master's degree in criminal justice from Charleston Southern University.