May 07, 2021
Summary: If you're stressed out about your debt collection lawsuit, a stipulated judgment might be just what you need. Or it could be your biggest nightmare. Learn everything you need to know before signing a stipulated judgment.
If you are being sued for a debt, you want to do anything to settle the matter out of court. Debt collection lawsuits ending in default judgment can be detrimental to your long-term economic stability. There is also the issue of paying an attorney and court fees, not to mention the threat of wage garnishment and a lien on your property if you lose your lawsuit. In the long-term, losing your case has the potential to impede your ability to have stability from employment, housing, and credit.
Any debtor facing these circumstances would likely welcome an alternative way of settling the debt. One such method is signing a stipulated judgment. Let's take a closer look at what a stipulated judgment is and what you should consider before agreeing to it.
A Stipulated Judgement is a court order that requires the debtor to pay the debt collector a specific amount according to an agreed schedule. Debtors often seek a stipulated judgment as a last resort to settling debt when sued for money owed.
The judgment stops the creditor from a forceful collection of payments through wage garnishment, bank levy, or a lien. A stipulated judgment has similar effects as a regular judgment, but the main difference is the debtor agrees to gives up essential rights:
After signing a stipulated judgment, you're required to make payments directly to the creditor as stated in the agreement. Usually, the creditor agrees to a lesser amount, but the stipulated judgment shows the total amount. If you default payment at any point during the repayment period, the creditor is protected because they still have a judgment for the entire amount without going through a trial.
If you end up defaulting again, your wages or bank account can be garnished to recover the full amount, but this time you pretty much agree to let it happen without the ability to fight it via a lawsuit.
A stipulated judgment saves you from a glaring judgment notice from appearing on your credit report. Since creditors hardly report payments made to the credit reporting bureaus. Your credit report can improve if you clear the whole debt. This obviously will not happen overnight, but if you can commit yourself to diligently paying it off, it will be worth it in the end.
During the repayment process, you want to keep an accurate record of all payments made during the process. You will want to ensure that you do not make any payments via check as the creditor can gain access to your bank account with your account number, so make your payments via a more secured method.
Stipulated judgment prevents creditors from garnishing your wages. Unfortunately, creditors can garnish up to 25% of your wages. Though there are methods you can take to stop this or lessen the amount the creditor can garnish, this itself is also a process that the court will decide during a hearing. Avoiding garnishment saves you from the embarrassment of your employer knowing about your money troubles and keeps more money in your wallet at the end of the day.
The primary benefit of signing a stipulated judgment is that it puts an end to litigation, especially if you do not have a good defense against the debt collector. However, you want to consider a few things before signing such an agreement.
A debtor with a legitimate defense should consider going to trial instead of agreeing to a stipulated judgment. One such defense is the statute of limitations. For example, if the statute of limitations expired on your debt, the debt collector may have lost rights to enforce payment or a lawsuit. The debtor may also argue that the creditor is falsely suing the wrong person who incurred the debt. If the debt collector can't prove that they obtained the debt from the original lender, they can't enforce it against the debtor.
You may be unaware of the many defenses that may apply to your case, so you should thoroughly explore the defenses you can use to fight your lawsuit.
Additionally, depending on the amount of debt you owe and your original creditor, it may be in your best interest to file a Motion to Compel Arbitration. If your credit card agreement contains an arbitration clause, you may be able to file this motion, and, in some cases, it will not be worth it for the plaintiff to continue to pursue the lawsuit. Arbitrations are not cheap. The plaintiff will have to pay for your transport, attorney's fees, and other associated costs. If your debt is minuscule, they may not wish to continue the suit any further. It may be in your best interest to see if this is a good option for you.
If the debt collector or Plaintiff approaches you with an option to sign a stipulated judgment, they may offer you a few concessions to do so. Your creditor may agree to waive the late fees, accrued interest, or part of the principal balance. Suppose the plaintiff agrees to do any of the following. In that case, it may be in your best interest to sign the stipulated judgment if you can make certain negotiations that lessen your initial amount owed. It is important to note that a stipulated judgment is only beneficial if you can sustainably make payments until your debt is settled. Otherwise, the creditor may enforce the whole amount, as highlighted above.
A debtor should only agree to a stipulated judgment if it's in writing. If the creditor is promising to waive interest or allows you to make payments of a particular amount over a specific period, they should put it in writing. If you do not have anything in writing, you ultimately have word of mouth, and this is not sufficient proof or protection should anything go south. If the plaintiff does not agree to put anything in writing, it's a sign that the creditor is unwilling to comply with the promises made.
If the creditor does not provide a grace period for late payment, then signing a stipulated judgment is risky. However, if the debt collector allows reasonable time for you to make payments before declaring you've defaulted payment, consider signing the agreement. Before signing the stipulated judgment, find out what the Plaintiff's policies are on late payments.
If you don't want to sign a stipulated judgment, you can agree to a consent order. It's a voluntary agreement between the debtor and the creditor regarding a debt payment plan. Consent orders usually vary by state and jurisdiction, so look into your state's laws on this.
With this alternative, you can negotiate a settlement on your terms that can be enforced without signing a stipulated judgment. This method applies if the debt owed is relatively low, usually less than $10,000, and you can pay it off within a year or via a large lump sum. If you go with this option, ensure the creditor waives your accrued interest. It's common for debtors to negotiate their settlement terms and forget to ask for a waiver on interest charges. You don't want to make this mistake if you go this route because your debt will continue to accrue interest at the current rate, ultimately extending the payment period.
If you take this alternative, the creditor should agree, in writing, not to file the stipulated judgment with the court unless you default payment. You want to take this step because some creditors agree to a settlement plan, then compel you to sign a stipulated judgment and file it with the court. Creditors can use a stipulated judgment as leverage they can enforce if you default on the Consent Order.
If the court has already granted the stipulated judgment, filing for bankruptcy can withdraw the creditor's ability to collect the debt if it's dischargeable. Non-dischargeable debts like tax debt, student debt, alimony, and child support can't be forgiven in bankruptcy.
If the creditor enforces the judgment and creates a lien on your property, you can't dismiss it by filing for bankruptcy. This means the creditor can:
Consenting to a stipulated judgment under the right terms can help you avoid the headache of going through trial if you can make payments consistently. We hope these insights help you decide if a stipulated judgment is right for you.
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.