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What Is A Novation?

     Copyright (c) 2014 Mark Shapiro

It's usually good news, when you settle a large judgment for less than the full amount due.

Many settlements make the underlying judgments obsolete, however it does not need to be this way. I'm a Judgment Broker, not an attorney. This article is my opinion, please hire a lawyer if you need legal advice.

The drawback when using "settlement agreement" in your document is these agreements can easily be breached, and another battle in a court is often needed to bring one more case to judgment. Instead, consider titling this kind of compromising document as a "memorandum of understanding", which gets the same end result, without the potential to litigate a breached agreement to settle.

What should you do if your judgment debtor's attorney insists on a settlement document, should you roll over and sign the agreement or stand your ground? Before you sign a settlement agreement, consider the chances of the judgment debtor not repaying you.

What happens if you sign one of those kinds of settlement agreements which you should not ever sign, one that contains the phrase "release of all claims"? Then you'll have a possible big novation problem.

A novation is a new obligation which takes the place of the old one when sign it. You should avoid this at all costs, as if you put your signature on this kind of agreement; it can be considered to be novation, and your judgment vanishes as a matter of law, when you sign such an agreement.

Instead of novation, use an accord and satisfaction, where you agree to accept something different to satisfy the obligation, but the previous obligation remains standing if the agreement is breached. That's a huge difference.

If you've got language within your agreement that says this agreement doesn't replace the original judgment obligation, the judgment remains active but it is temporarily stayed; you'll bypass novation and the judgment will remain active.

It is a good idea to add a paragraph within your agreement that states your agreement is an accord and satisfaction, and is not a novation. The normal boilerplate in the majority of pre-judgment settlement agreements can be a trap for the inexperienced in post-judgment matters.

When the debtor pays in full as per the agreement, the debt is extinguished; but absent complete performance by the judgment debtor, the judgment becomes due again in full.

If your debtor pays the amount owed as per your compromise memorandum of understanding, then you satisfy the judgment. When you satisfy the judgment, make sure to do these seven steps if applicable:

1) A satisfaction of judgment should always be filed at the court.

2) Record the satisfaction of judgment in all counties where you recorded an abstract of judgment.

3) File a release of any Uniform Commercial Code liens liens with your Secretary of State.

4) Release any upcoming levies.

5) Release any other liens you have obtained.

6) Dismiss any fraudulent conveyance lawsuits with prejudice.

7) Agree to sign any other document(s) reasonably requested by the judgment debtor to confirm that their judgment was completely satisfied and all liens have been released.

Some judgment enforcers will not sign any settlement agreements. They say: "When you hand over a check, I'll give you a judgment satisfaction, period". The judgment is a matter of public record so they refuse to sign a settlement agreement.

Some attorneys have requested that judgment recovery specialists to move to have judgments vacated for payment. Certain debtors do not like the stigma of a judgment but to that, most enforcers would say something similar to: "Too bad, you should have handled this a long before now if you didn't want a judgment against you on the public record".

Article Source:

Mark D. Shapiro - Judgment Referral Expert - - where Judgments go and are quickly Collected!

Posted on 2014-08-30, By: *

* Click on the author's name to view their profile and articles!!!

Note: The content of this article solely conveys the opinion of its author.

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