Why Buying Judgments Is A Good Idea
I am not an attorney or financial expert, I am a judgment matchmaking expert (Judgment Broker). As with paintings, judgments can be purchased and sold. Just like paintings, you can purchase junk or buy quality investments.
Unlike a painting, you don’t purchase a judgment for it’s looks, just to place on a shelf. Anyone who buys a judgment should plan on either enforcing it, getting some entity recover it, or to sell it later, hopefully at a profit.
There are at least four good reasons to purchase judgments:
1) Judgments have state-mandated interest rates. For example, in California, the interest rate is currently 10% simple interest per year. Not many investments can match this interest rate.
2) Judgments can be renewed for many years.
3) Judgments can be bought at for huge discount.
4) Once a judgment is purchased, liens can be placed on real estate and sometimes the personal property of the judgment debtor.
There are at least 4 reasons not to purchase judgments:
1) Judgments are not cash, and are not fungible. You cannot bring a judgment to a bank and get any cash for it, or use one as collateral to procure a loan.
2) Judgments can be risky. Everything depends on the health and finances of the judgment debtor. If the debtor dies, moves out of the country, becomes disabled or sick, or successfully applies for bankruptcy protection, the value of the judgment can fall to zero.
3) Judgments cost money to enforce or sell. If you have a judgment and need it recovered, the average cost is 50%. Worse yet, there is no guarantee, as repayment depends on the judgment debtor. If you sell your judgment for cash, you may get more or less than you paid for it.
4) Judgment liens do not pay off on “underwater” property (where there is no equity). Judgment liens can be removed by a bankruptcy court, or have very little effect in places like Florida.
Should you buy a judgment as an investment? The answer depends on the details about the debtor, and the price you must pay to get ownership of the judgment.
A judgment broker, who knows about thousands of judgment sales, can provide you an estimate of a judgment’s value. However, only the market and the details concerning the debtor, determine the actual sale price of any judgment.
As an investor, you should always buy judgments outright, where you own all rights, title, and interests in the judgments. Do not share the ownership of a judgment, unless you seek the advice of an attorney, and they have verified any shared ownership proposals.
Different than cash or gold, a judgment is a piece of paper that only is of value to the proper owner. A stolen judgment is useless. Also, if you lose a judgment, the court (for a fee) will easily replace it.
If you can afford to take some risk in your portfolio, and you can find a bargain where the risks are moderate, judgments are no more risky that stocks. If the economy bounces back, they might be the best investments around.