Stipulated Judgment

What Is Stipulated Judgment?

A stipulated judgment is a court order requiring one party to pay another party a specific amount of money, usually on a payment plan. A stipulated judgment, also known as a consent judgment, is arranged in the courts by a debtor who has limited means of repaying debt, often established as a means for a debtor to prevent wage garnishment.

Understanding Stipulated Judgment

A stipulated judgment is a court order issued to settle a debt, which requires that a debtor pay their creditor a specified amount according to an agreed schedule. In most cases, a stipulated judgment is sought by a debtor as a last-ditch attempt to settle a debt with a creditor that has sued for repayment of monies owed, as well as any associated fees and interest.

If a creditor can secure a civil judgment against a debtor, the court can order payment through a variety of means, including voluntary payments and garnishment of the debtor's paychecks. Debtors who face a court judgment regarding delinquent debt may petition the court for a stipulated judgment in order to halt garnishment and other collection proceedings.

Stipulated Judgments vs. Bankruptcy

While laws vary from case to case and state to state, stipulated judgments may sometimes be dischargeable in bankruptcy.

Many kinds of debt cannot be forgiven in bankruptcy, including student loans, tax debt, child support, and alimony. Other types of debt may be forgiven in bankruptcy at the discretion of the court. A debtor with a stipulated judgment against them will need to consult an attorney familiar with the federal and state laws governing bankruptcy and the discharge of debt.

Requirements for Stipulated Judgment

A debtor who agrees to a stipulated judgment establishes a legally-binding agreement with their creditor to pay a specified amount of money on a specified timeline. In many cases, debtors find a stipulated judgment advantageous in agreeing to settle a debt, as creditors are sometimes willing to negotiate for a reduced amount. They may also forgive late fees, interest charges, and even part of the principal balance in order to settle the debt.

Delinquent debtors who agree to stipulated judgments must then meet all repayment obligations on the agreed timeline with the debtor, or run the risk of forfeiting all benefits, including fee reductions and the threat of wage garnishment.

At the time a stipulated judgment is issued, it will address the terms and conditions in case either party does not uphold their agreement. In most cases, when a debtor fails to adhere to the payment plan agreed upon in a stipulated judgment, the debtor will then be liable for the entirety of the original debt including interest and fees, minus monies already paid back.

A stipulated judgment is a court decision. By signing the stipulated judgment, a debtor is held liable for payments and may not be offered the courtesy of a trial, if they default on their payments. If the debtor is not interested in entering a stipulated judgment, then they can agree to a consent order — a voluntary order worked out between two parties interested in reaching an agreement regarding payment of debt. Consent orders vary by state and jurisdiction.

Stipulated Judgment Example

John has run up a debt of $6,000 on a credit card and cannot repay it back immediately. The credit card company has turned the case over to a collection agency, which harasses John with calls and letters threatening wage garnishment.

John tried negotiating with the credit card company, but neither party could agree to the terms and repayment amount. The credit card company wanted a higher monthly repayment amount — $500, which John could not afford with a low-paying job.

Eventually, John talked to an attorney who told him to work out a stipulated agreement with the company. Under the terms of the judgment, John now pays a monthly amount of $100 and is required to pay off the entire debt within 60 months.