There are several ways to resolve a debt: (1) by paying the debt in full, (2) by settlement of some type; or (3) by way of bankruptcy. Which you choose again depends on your circumstances and when you pay – either pre- or post-judgment.
If you have the means to pay the debt in full, then obviously you should do so. Payments can always be made directly to the creditor. Some courts, like NC, allow a debtor to also pay any debts for which judgment has been entered directly to the clerk of court.
If a lawsuit has been filed and payment is made in full, the creditor or law firm will dismiss the case. If preferable, get any case dismissed with prejudice. Those words “with prejudice” mean that any lawsuits on the debt cannot be re-filed again. If a judgment has already been entered and payments are made directly to the clerk of court, the clerk will automatically mark the judgment as satisfied upon receipt of payment. If paying the creditor directly, then the creditor has an obligation to mark the judgment as satisfied within 60-90 days of receipt of your final payment. Most states have procedures where this is not done. If a judgment is not marked satisfied, then the debtor writes to the creditor and demands that it be done. For creditors who refuse, the law may specify a procedure – usually, an application is made to the court and the court orders it to be done. There are also sanctions for those creditors who force a debtor to engage in such drastic remedies and they usually involve the debtor being awarded a small sum of damages and attorney’ fees. See [FN1], [FN2] and [FN3]. below.
There are different methods of resolving a debt by way of debt settlement or debt negotiation.
If a debtor is seeking to settle the debt using debt negotiation, lump sum payments are preferred. Settlements can range from anywhere as low as 10% to 100% of the debt. Most credit card debt will typically settle for 20% to 40% pre-judgment and 50%-80% post-judgment. These are just general guidelines and may or may not apply to any particular case. Ultimate settlement depends on a whole host of other factors which is beyond the scope of this article.
Once the debtor and creditor agree on a settlement amount, the debtor should request a settlement letter indicating the balance owed, the settlement amount, how it is paid, where it is paid and when the settlement payment(s) will be due. If this is a debt with a debt collector or original creditor, then make sure the letter includes that there will be no further collection activity and that no further monies will be owed once the settlement is paid. If settlement is made after the filing of a lawsuit, make sure the letter includes an agreement stating that the lawsuit will be dismissed or dismissed with prejudice once the settlement is paid. If a judgment is entered, make sure that the letter acknowledges that the judgment will be marked satisfied once the settlement is paid. Pay via money order or certified check and make a copy before it is sent. Keep the proof of payment and settlement letter forever as debts have a way of re-surfacing and you want to be able to prove that payment was made if that happens. See my article about Zombie Debts at http://www.rachelhunterlaw.com/zombie-debts-credit-report/. Follow up any settlements by getting a closure letter acknowledging that the settlement was received, that no further collection activity will occur, that no further monies are owed and that the matter will be reported as “paid debt settled” or “paid collection account” to the credit bureaus. If a lawsuit is filed, get a copy of the dismissal. If a judgment is entered, then get a copy of the satisfaction of judgment once it is filed. Keep the copy of the dismissal, satisfaction/release of judgment and closure letter forever as well as you may need them.
Finally, settlements are usually made in a lump sum or over a short period of time. If you want to resolve a debt, but want to pay in increments, the creditors will probably permit this. However, payments are made on the full balance and are typically 1% to 4% of the debt for things like credit cards. Again, this is an estimate and actual experience will depend on your unique situation. If a lawsuit has been filed, a creditor may want the debtor to sign an agreement authorizing the entry of judgment. The agreement, sometimes set forth in a separate document called a consent judgment or consent agreement, also will provide that the creditor will not seek to collect on the judgment by garnishing wages or seizing bank accounts or other assets for so long as the debtor makes the agreed payments. It will be up to the debtor to faithfully make the payments as agreed. The creditors don’t send a bill so it’s important to be diligent about this and keep good records. Make sure that any consent judgments specify whether or not interest will continue to accrue. Many debtors forget to factor this in only to find out that additional sums are owed when the debtor thinks the debt has been repaid.
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[FN1] GEORGIA
O.C.G.A. § 9-13-80. Execution to be canceled when satisfied; private right of action; damages
(a) Upon the satisfaction of the entire debt upon which an execution has been issued, the plaintiff in execution or his or her attorney shall timely direct the clerk to cancel the execution and mark the judgment satisfied. Such direction shall be delivered to the clerk not later than 30 days following the date upon which the execution was fully satisfied.
(b)(1) A private right of action shall be granted to a judgment debtor upon the failure of such plaintiff or counsel to comply with the provisions of subsection (a) of this Code section.
(2) Failure to direct cancellation and satisfaction within 60 days after satisfaction of the entire debt shall be prima-facie evidence of untimeliness.
(3) Recovery may be had by way of motion in the action precipitating the judgment and execution or by separate action in any court of competent jurisdiction.
(4) Damages shall be presumed in the amount of $100.00 and the court may award reasonable attorney’s fees. Actual damages may be recovered, but in no event shall recovery exceed $500.00; provided, however, the court may also award reasonable attorney’s fees.
(c) In order to authorize the clerk of superior court to make an entry of satisfaction with respect to an execution on the general execution docket, there shall be presented for filing on the general execution docket:
(1) A satisfaction upon the original execution or alias execution itself;
(2) A satisfaction as provided in subsection (d) of this Code section; or
(3) A satisfaction as provided in subsection (e) of this Code section.
Any clerk of superior court who cancels of record any execution in the manner authorized in this subsection shall be immune from any civil liability, either in such clerk’s official capacity or personally, for so canceling of record such security deed.
(d) Proof of satisfaction of an execution, the original of which has been lost, stolen, or otherwise mislaid, may be made based upon an affidavit executed by the plaintiff in execution or owner or holder of record of such execution and who so swears in such affidavit, which affidavit shall be recorded in the execution docket and shall be in the following form:
County, Georgia
Affidavit for Satisfaction of Execution
The original execution having been lost or destroyed and the indebtedness,
penalties, and interest referred to in that certain writ of fi. fa. styled
__________ v. __________ , dated _____, and of record in General Execution
Docket Book _____. Page _____, in the office of the clerk of the Superior
Court of __________ County, Georgia, having been satisfied in full and
present owner of such writ of fi. fa. by virtue of being the plaintiff in
fi. fa. or the heir, assign, transferee, or devisee of the original plaintiff in fi. fa., the clerk of such superior court is authorized and directed to
make an entry of satisfaction with respect to such writ of fi. fa.
In witness whereof, the undersigned has set his or her hand and seal,
this _____ day of _____, _____.
(SEAL)
Signature
Signed, sealed, and delivered on the date above shown
Notary Public
(SEAL)
My commission expires: .
(e) In the event that a plaintiff in execution or any person that owns or holds an execution has failed to properly transmit a legally sufficient satisfaction or cancellation to authorize and direct the clerk or clerks to cancel the execution of record within 60 days after a written notice mailed to such plaintiff in execution or owner or holder of record by registered or certified mail or statutory overnight delivery, return receipt requested, the clerk or clerks are authorized and directed to cancel the execution upon recording an affidavit by the attorney for the judgment debtor against whom the execution was issued or any attorney who has caused the indebtedness and other obligations under the execution to be paid in full or any attorney who has actual knowledge that the indebtedness has been paid in full. The notice shall be mailed to the plaintiff in execution or owner or holder of record, shall identify the execution, and shall include a recital or explanation of this subsection. The affidavit shall include a recital of actions taken to comply with this subsection. Such affidavit shall include as attachments the following items:
(1) A written verification which was given at the time of payment by the plaintiff in execution or owner or holder of record of the amount necessary to pay off such obligations; and
(2) Any one of the following:
(A) Copies of the front and back of a canceled check to the plaintiff in execution or owner or holder of record showing payment of such obligations;
(B) Confirmation of a wire transfer to the owner or holder of record showing payment of such obligations; or
(C) A bank receipt showing payment to the plaintiff in execution or owner or holder of record of such obligations.
(f) Any person who files an affidavit in accordance with subsection (d) or (e) of this Code section which affidavit is fraudulent shall be guilty of a felony and shall be punished by imprisonment for not less than one year nor more than three years or by a fine of not less than $1,000.00 nor more than $5,000.00, or both.
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[FN2] NORTH CAROLINA
N.C.G.S. § 1-239. Paid to clerk; docket credited; transcript to other counties; notice to attorney for judgment creditor; judgment creditor to give notice of payment; entry of payment on docket; penalty for failure to give notice of payment.
(a) Payment of money judgment to clerk’s office.
(1) The party against whom a judgment for the payment of money is rendered by any court of record may pay the whole, or any part thereof, in cash or by check, to the clerk of the court in which the same was rendered, although no execution has issued on such judgment.
(2) The clerk shall give the party a receipt showing the date and amount of the payment and identifying the judgment, and shall note receipt of the payment on the judgment docket of the court. If the payment is made by check and the check is not finally paid by the drawee bank, the clerk shall cancel the notation of receipt and return the check to the party who tendered it.
(3) When a payment to the clerk is made in cash or when a check is finally paid by the drawee bank, the clerk shall give the notice provided for in subsection (b). When the full amount of a judgment has been so paid, the clerk shall include the words “JUDGMENT PAID IN FULL” in the notice.
(4) When a judgment has been paid in part, but not in full, the clerk shall furnish a certificate of partial payment to the clerk of superior court of any county to which a transcript of a judgment has been sent, but only upon the request of that clerk or of the party who made the partial payment.
(5) When a judgment has been paid in full, and the party in whose favor the judgment was rendered has collected all payments made to the clerk, or when ten days have passed since notice of payment in full was sent pursuant to subsection (b) and the party has neither collected all payments made to the clerk nor notified the clerk that the party disputes payment of the full amount of the judgment, then the clerk shall immediately:
a. Mark “PAID AND SATISFIED IN FULL” on the judgment docket, and
b. Forward a certificate of payment in full to the clerk of superior court in each county to which a transcript of the judgment has been sent.
(6) If the party in whose favor a judgment has been rendered notifies the clerk that the party disputes payment in full of the judgment, the clerk shall proceed as provided in G.S. 1-242.
(7) Entries of payment or satisfaction on the judgment dockets in the office of the clerk of the superior court by any person other than the clerk shall be made in the presence of the clerk or his deputy, who shall witness the same.
(b) Upon receipt of any payment of money upon a judgment, the clerk of superior court shall within seven days after the receipt of such payment give notice thereof to the attorney of record for the party in whose favor the judgment was rendered, or if there is no attorney of record to the party. Any other official of any court who receives payment of money upon a judgment shall give notice in the same manner; provided, further, that no such moneys shall be paid by the clerk of the superior court until at least seven days after written notice by mail or in person has been given to the attorney of record in whose favor the judgment was rendered; provided further, that the attorney of record may waive said notice, and said moneys shall be paid by the clerk of superior court, by signing the judgment docket.
(c) Upon receipt by the judgment creditor of any payment of money upon a judgment, the judgment creditor shall within 60 days after receipt of the payment give satisfactory notice thereof to the clerk of the superior court in which the judgment was rendered, and the clerk shall thereafter promptly enter the payment on the judgment docket of the court, and the clerk shall immediately forward a certificate thereof to the clerk of the superior court of each county to whom a transcript of the judgment has been sent, and the clerk of each superior court shall thereafter promptly enter the same on the judgment docket of the court and file the original with the judgment roll in the action. If the judgment creditor fails to file the notice required by this subsection within 30 days following written demand by the debtor, he may be required to pay a civil penalty of one hundred dollars ($100.00) in addition to attorneys’ fees and any loss caused to the debtor by such failure. The clear proceeds of civil penalties provided for in this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. § 115C-457.2.
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[FN3] PENNSYLVANIA
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