Whenever a judgment debtor pays off or settles a judgment, the creditor must (or at least should) file a proof of satisfaction at the court where the judgment was obtained.

A satisfaction of judgment is a (correctly filled out and usually notarized) court form that is filed and endorsed (stamped) by the court. Only a satisfaction of judgment (or a successful bankruptcy) can eliminate a judgment debt.

Until a judgment is satisfied correctly, the judgment debt stands. Unsatisfied judgments can show up on credit reports, subjecting a debtor to surprise levies and garnishments, and even a sheriff taking their property or car.

Some states have strict time limits on when you must file a satisfaction of judgment – for example, 2 weeks, or 30 days – while other states do not have any such time limits. An advantage of such a time limit is, that the debtor should quickly be relieved of having a judgment debt hanging over them after they paid the judgment off.

One disadvantage of this time limit, is that checks (even cashiers checks) can be faked or bounce, even months later in some cases. A partial solution for the creditor, can be to have the debtor pay the court directly. That way if the check is bad, the court will go after the debtor. Another solution is to meet the debtor at the bank, and stand nearby, while you watch them get a cashier’s check, that will eliminate any chance of a bad cashier check.

Another potential problem to be aware of is, that a debtor can file for bankruptcy protection. If the debtor files it within 90 days of paying off a judgment debt, the creditor might have to give back the money to the bankruptcy court trustee.

A judgment debtor can pay off a judgment by paying the court directly, paying the creditor (which could be the original judgment creditor, or an assignee of record), or paying the sheriff, in the case of a seizure (levy) of the debtor’s property.

Sometimes a judgment debt is paid in full, other times it is settled for less than what is legally owed. The creditor always has a right to settle for less than what is legally owned, and often this makes sense. Sometimes judgments are recovered for less than what is legally owed, even when the (smart) creditor has the upper hand. Having the upper hand does not mean one should always use that hand.

For example, in some places it costs more than $200 to levy a bank account. In the case of a judgment debt of $2,000, if the sheriff levies the full $2,000, the $200 you spent to do this is usually not collected. That $200 is legally part of the judgment debtor’s debt, but collecting that $200 often requires a separate levy action you must pay for. While this problem can sometimes be partially solved with planning, there is usually an unpaid amount owed after a levy. Often it is better to “eat” the last unpaid small percentage of the debt owed, and simply satisfy the judgment and move on from the tedious experience of attempting to recover a judgment.

Sometimes the debtor needs to remind the creditor to file the satisfaction of judgment. The debtor can check with the court to make sure the judgment has been satisfied. If the creditor, after being paid in full, refuses to properly satisfy the judgment, the debtor can sue them.

The debtor should do their best to not pay off their judgment with cash, unless they get a signed receipt that lists the case number, or are paying the court or the sheriff. A debtor should keep together copies of all checks or money orders used to pay off a judgment, and a copy of both the judgment and the satisfaction.

Note that the creditor is only required to file a satisfaction of judgment. If a certified copy is needed to file at a county recorder, it is usually the debtor’s responsibility.

In California, you must file a notarized “Acknowledgement Of Satisfaction of Judgment” with the Court. The law ignores the real world possibility of bounced checks and bankruptcy, and requires you to file the Satisfaction within 14 days. In California, if there are many names, one would use a EJ-100 form and type the words “Item X, See Attachment 1”, and use an MC-025 form to list each recorded Abstract.

Any liens are removed by filing the satisfaction of judgment with the Court and recording a certified copy of the satisfaction of judgment at the county recorder, etc. The satisfaction of judgment can be recorded either by you or the judgment debtor – whatever is agreed upon between you and the judgment debtor. I recommend the creditor does it for the debtor so they know it is done correctly, but sometimes, the judgment debtor wants to do the recording (which is just fine because they pay the recording fees), or an escrow company will handle it. At the court, they may have only a drop off service so be pre-prepared with a stamped self-addressed stamped envelope with your address.