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How to Settle a Judgment

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Mark Cappel
UpdatedApr 29, 2024

I want to buy a house, but my mortgage lender wants me to settle on a judgment against me. How do I do this?

I have a judgment against me from 2005 and are trying to purchase a home for the first time. My lender is asking me to settle the judgment before we can close. I tried to settle with the finance company but the account of course is closed. So I contacted the company who was handling the account which is also closed. They are saying now that the amount has gained interest and is almost three times what the judgment was for. Can they do this? I don't have the money to pay off this judgment and put a down payment on my home. How can I go about getting this resolved? Please help, this is the only thing I have to do before closing!

It appears that a collection agent now owns your debt account. It is likely that the collection agent bought your debt account for 5%-50% of the original balance. The add-ons and fees are an invention of the collection agent, and used as leverage by the collection as a negative reinforcement to prod you to settle sooner rather than later.

Contact the collection agency handling the account to discuss a settlement. Do not reveal to them you are closing on a house soon or they will use that information as leverage in the negotiations. You may wish to offer 20% of the balance to begin, observe the creditor’s reaction, and then increase your offer as you feel appropriate.

I would expect that a creditor with old debt will likely settle for 40% to 50% of the balance owed. See Debt Negotiation and Settlement Advice for tips and tactics when negotiating a debt settlement.

If a creditor accepts a reduced balance settlement, it will usually expect the settlement to be paid within a matter of days, so you should make sure that you have the necessary funds available to tender payment before you begin negotiations in earnest. Get the final settlement agreement in writing, and keep copies of the settlement in several safe locations.

Settling a debt should cause the account to report a $0 balance to the credit bureaus. For more information about negotiating with your creditors, you can read this debt settlement article in

I wish you the best of luck. I hope that the information I have provided helps you Find. Learn. Save.



Did you know?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Each state has its rate of delinquency and share of debts in collections. For example, in Louisiana credit card delinquency rate was 5%, and the median credit card debt was $355.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.