Selling Judgments to Collection Agencies: What to Expect

Winning a court case and receiving a money judgment is only the beginning. Enforcing that judgment—and actually collecting your money—is often the hardest part. That’s where collection agencies that buy judgments come in. These specialized companies purchase your court-awarded debt for a discounted price and then pursue recovery using their own resources.

This article explains how judgment buying works, why creditors sell, and what you need to know before entering this kind of agreement.

What Does It Mean to Sell a Judgment?

A judgment is a court decision that awards one party (the creditor) money from another (the debtor). These can result from:

• Unpaid invoices

• Loan defaults

• Contract disputes

• Property damage or evictions

Once a judgment is issued, the creditor has the legal right to enforce payment using tools like wage garnishment, liens, or bank levies.

Selling a judgment means legally transferring that enforcement right to a third party—usually a collection agency that specializes in judgment recovery. Instead of waiting years and chasing the debtor yourself, you get cash up front, and the agency takes over.

Why Creditors Sell Judgments

Even though you’ve won in court, collecting on a judgment can be difficult and expensive. Reasons creditors sell include:

1. Lack of Time and Expertise

Most small businesses or individuals don’t have time to:

• Track down debtors

• File liens or garnishment paperwork

• Respond to legal defenses

• Monitor state-specific renewal timelines

Selling the judgment shifts the burden to someone with tools and experience.

2. Cost of Enforcement

Legal enforcement may involve:

• Attorney fees

• Court filing costs

• Skip tracing or asset searches

• Process servers

If the judgment is under $10,000, these costs may outweigh the possible return.

3. Difficulty Collecting

Sometimes, debtors:

• Hide assets

• Move out of state

• Have no income or property to seize

Rather than pursue a low-probability recovery, creditors sell to an agency willing to take the risk.

Learn more about offloading administrative burdens in How to Handle Admin Tasks Efficiently.

How Collection Agencies Buy Judgments

Selling a judgment is a private legal transaction, and each deal is negotiated individually. Here’s how it typically works:

1. Initial Contact and Evaluation

You provide the agency with:

• A copy of the judgment

• Details about the debtor (name, last known address, employer)

• Payment history or settlement attempts

• Any liens or garnishments already filed

The agency uses this to estimate collectability.

2. Price Offer

The agency may offer to buy your judgment for 10% to 50% of its face value, depending on:

• Age of the judgment

• Debtor’s income/assets

• State enforcement laws

• Likelihood of successful recovery

Older or harder-to-collect judgments fetch lower prices.

3. Legal Transfer and Documentation

Once agreed, the agency prepares a Judgment Assignment Agreement. This may need to be filed with the court, depending on the jurisdiction. You’ll sign over:

• The right to collect

• Any enforcement rights

• Interest or penalty accruals

Make sure all terms are in writing.

4. Payment to You

After documentation is finalized, you receive your agreed payment—usually via check, wire, or ACH. The agency then takes full control of the collection process.

Explore Virtual Assistant Services for Small Businesses if you want to automate collections before considering a sale.

What Collection Agencies Do With Judgments

Once a collection agency owns your judgment, they begin the enforcement phase. Because they are now the legal holder, they can pursue payment through:

1. Wage Garnishment

In most states, a portion of the debtor’s paycheck can be legally withheld until the judgment is paid. The agency:

• Identifies the debtor’s employer

• Files garnishment paperwork with the court

• Coordinates with payroll departments

This is one of the most common and effective tools.

2. Bank Account Levies

Agencies can also:

• Locate debtor bank accounts

• Serve a levy through the court system

• Freeze and seize available funds

This works well if the debtor has liquid assets but no steady income.

3. Real Estate and Asset Liens

Agencies may:

• Record the judgment as a lien against real property

• Wait for a home sale or refinance

• Force a sale in rare cases

This is a long-term tactic but useful if the debtor owns a home or land.

Explore How to Run a Small Business Profitably for tips on building sustainable recovery strategies.

Pros and Cons of Selling a Judgment

Pros

• Immediate cash flow

• No further legal effort

• Avoids court filings and tracking

• Eliminates stress and follow-up

Cons

• You may only recover 10–50% of the face value

• You lose control of how aggressively the debtor is pursued

• A poor sale contract could lead to disputes over liability

Think carefully before selling. If the debtor is collectible and the judgment is recent, you may earn more by hiring a collection agency on contingency instead.

See Cost-Effective Strategies for Business Growth to weigh financial trade-offs.

Legal Considerations in Judgment Sales

Selling a judgment isn’t just a handshake deal—it’s a legal transaction. Keep these in mind:

1. Know Your State’s Rules

Some states require:

• Court approval of the transfer

• Formal filing of assignment documents

• Registration of the buyer as a debt collector

Always consult your state’s court or legal guidelines.

2. Watch Out for Scams

Scam buyers may:

• Offer fake contracts

• Disappear after the transfer

• Seek private data under false pretenses

Only work with licensed, verifiable agencies. Ask for:

• DFPI or state collection license

• Business registration

• References or reviews

3. Statute of Limitations

Judgments expire unless renewed. Most states allow enforcement for 10 years—but you must renew before expiration. If you sell a near-expired judgment, the buyer may lose their rights unless they act fast.

Explore Guide to Hiring Back-Office Operations for insights on keeping legal processes documented.

Alternatives to Selling a Judgment

If selling doesn’t feel right, consider:

1. Hiring an Agency on Contingency

You keep ownership of the judgment, and the agency earns 20–40% of what they recover. You maintain control, and risk is shared.

2. DIY Enforcement

Some creditors:

• File garnishment orders themselves

• Use skip-tracing tools

• Manage liens and court filings

This is best for motivated individuals with legal support.

3. Use a Judgment Recovery Specialist

These niche professionals only work on judgment enforcement. They’re licensed in multiple states and can work for a fee or commission.

Case Study: Contractor Sells Judgment to Collection Agency

A Sacramento-based general contractor won a $9,200 judgment against a client who failed to pay for completed renovations. After months of no response, he sold the judgment to a licensed California agency for $3,200.

Why it worked:

• He needed working capital immediately

• The client had moved out of state

• He avoided legal costs and long delays

The agency later collected the full amount via wage garnishment over 18 months. Both parties got what they needed based on their risk preferences.

Final Takeaways and Best Practices

Selling a judgment is a valid strategy when:

• You lack the resources to enforce it

• The debtor is uncooperative or evasive

• You prefer a guaranteed payout over uncertain future funds

Before you proceed:

• Vet the agency

• Get a written contract

• Know your state laws

• Keep copies of everything

This ensures your decision brings relief—not regret.

When Is the Best Time to Sell a Judgment?

Timing can significantly affect how much you receive for a judgment and whether selling it is your best option. Not all judgments are equal, and collection agencies assess them differently depending on age, enforcement potential, and financial climate.

Here’s how to know when it’s the right time to sell a judgment.

1. Immediately After Court Issuance (0–6 Months)

This is when your judgment has the highest value to a potential buyer. Why?

• The statute of limitations for enforcement is fresh

• The debtor likely hasn’t had time to move assets or avoid garnishment

• There may be high cooperation rates due to recent court pressure

Judgment buyers prefer newer debts that haven’t gone “cold.” If you need liquidity and don’t want to manage enforcement, this is the most profitable window to sell.

2. After Failed Enforcement Attempts (6–18 Months)

Many creditors first try:

• Wage garnishment

• Bank levies

• Contacting the debtor directly

If these fail, you may feel frustrated—but don’t give up. A collection agency may still buy the judgment if:

• You’ve gathered useful data on the debtor’s location or employer

• The debtor owns property

• The court documentation is complete and transferable

At this stage, expect a lower offer (20–40% of face value), but if recovery feels unlikely or too time-consuming, it could be a smart decision.

See How to Streamline Back-Office Operations to reduce inefficiencies when managing follow-ups internally.

3. Before the Statute of Limitations Expires (5–9 Years)

Most states allow judgments to be enforced for up to 10 years, and many allow renewal. However, as the enforcement clock runs out, your leverage drops. Buyers will offer:

• 5–15% of face value if enforcement is still possible

• Nothing if the judgment is expired and not renewed

If you plan to sell, do it at least 1–2 years before expiration. Otherwise, renew the judgment and attempt enforcement again before selling.

4. If You’re Liquidating a Business or Estate

Many judgment sales occur during:

• Business closures

• Bankruptcy proceedings

• Probate or estate settlements

Judgments are legally transferable assets, which means they can be sold to help satisfy debts or wrap up financial affairs. Collection agencies will often negotiate directly with:

• Business attorneys

• Executors or estate administrators

• Liquidators

This turns a non-performing asset into immediate value.

5. During Personal or Financial Transitions

Sometimes, creditors sell simply because they:

• Are moving out of state

• Are retiring

• Need fast cash for a new venture

Even if the judgment is collectible, the cost of time and attention may outweigh the potential return. Selling provides a clean slate and removes the emotional or administrative weight of ongoing enforcement.

Explore Cost-Effective Strategies for Business Growth to reinvest your returns from judgment sales into smarter business initiatives.

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Sources

• Nolo – Enforcing Civil Money Judgments: https://www.nolo.com/legal-encyclopedia/enforcing-your-small-claims-judgment.html

• Consumer Financial Protection Bureau – Debt Collection Rights: https://www.consumerfinance.gov/consumer-tools/debt-collection/

• California Courts – Judgment Enforcement: https://www.courts.ca.gov/selfhelp-judgment.htm

• Debt.org – Selling a Judgment: https://www.debt.org/credit/selling-judgments/