How to Settle a Judgment in Florida

Settlement is the most common resolution for civil judgments in Florida. A judgment creditor would rather accept a negotiated payment than spend years pursuing collection through garnishment, liens, and court proceedings that may ultimately produce nothing. A judgment debtor who understands Florida’s exemption framework and collection mechanics can negotiate from a position of strength rather than desperation.

Why Creditors Settle

A Florida money judgment is enforceable for 20 years under § 55.081, but enforceability does not guarantee collectibility. The creditor must identify non-exempt assets, file the appropriate motions, and pay attorney fees at each step. If the debtor’s wages are protected by the head-of-household exemption, bank accounts are held as tenants by the entireties, and the home qualifies for homestead protection, the creditor faces a long and expensive process with uncertain results.

Creditors evaluate the cost of continued collection against the certainty of a settlement payment. A debtor who has structured assets within Florida’s exemption framework presents a creditor with a straightforward calculation: accept a guaranteed payment now or spend additional money chasing protected assets for years. The more difficult collection appears, the lower the settlement amount a creditor will accept.

When to Negotiate

Timing matters more than most debtors realize. The strongest negotiating position typically arises after the creditor’s initial collection attempt fails. If a creditor files a writ of garnishment against wages and the debtor successfully claims the head-of-household exemption, the creditor has just learned firsthand that routine collection will not work. That moment—when the creditor’s costs are rising and confidence is falling—is the optimal time to propose a settlement.

Waiting too long carries its own risks. Florida judgments accrue interest at the statutory rate set quarterly by the Chief Financial Officer under § 55.03. The rate is calculated by averaging the Federal Reserve Bank of New York discount rate and adding 400 basis points. Since 2011, the rate adjusts annually on January 1 for each existing judgment. At recent rates, a $100,000 judgment can grow by $8,000 to $10,000 per year in interest alone. Every year of delay increases the total amount the debtor must address.

The debtor should also consider whether the creditor is the original plaintiff or a debt buyer. Debt buyers purchase judgments at a steep discount, often 10 to 20 cents on the dollar. A debt buyer who paid $15,000 for a $100,000 judgment has a much lower floor for what constitutes an acceptable settlement than the original creditor who litigated the case for years.

How Asset Protection Creates Leverage

Settlement negotiation is fundamentally about leverage, and leverage comes from the creditor’s realistic assessment of what it can actually collect. A debtor whose assets are properly positioned within Florida’s exemption framework forces the creditor to confront a difficult reality: the judgment may be legally valid but practically uncollectible.

Florida protects an unusually broad range of assets from judgment creditors. Homestead equity has no dollar cap. Retirement accounts, annuities, and life insurance cash value are fully exempt. Wages of a head of household are entirely exempt from garnishment. Property held as tenants by the entireties is protected from the individual debts of either spouse.

A debtor who can demonstrate that substantially all assets fall within these categories has the strongest possible settlement position. The creditor’s alternative to accepting the settlement is spending more money on proceedings supplementary, hiring forensic accountants to search for non-exempt assets, and potentially litigating for years with nothing to show for it.

An opening settlement offer of 10% to 15% of the judgment face value is reasonable when the debtor’s assets are well protected. The final number depends on the judgment’s age, the creditor’s collection costs to date, and the creditor’s assessment of whether the debtor might file bankruptcy. A creditor who believes bankruptcy is likely will often accept less, because bankruptcy would discharge the judgment entirely.

Settlement Agreement Terms

A judgment settlement is a private contract between the debtor and creditor. The agreement should address several elements beyond just the payment amount.

The most critical term is the creditor’s obligation to file a satisfaction of judgment in the official records of every county where the judgment has been recorded as a lien. Under § 55.141, the clerk records a satisfaction when the full judgment amount is paid into the court registry, but a negotiated settlement for less than the full amount requires the creditor to execute and record the satisfaction directly. If the creditor fails to do so, the judgment lien remains on the public record even though the debt has been resolved.

The agreement should specify whether the settlement constitutes full and final satisfaction of all claims between the parties, including any claims for post-judgment interest and attorney fees that have accrued. It should include a mutual release preventing the creditor from pursuing the balance or assigning the remaining debt to a third party.

Payment timing matters as well. Lump-sum payments command larger discounts because they eliminate the creditor’s risk of default on an installment plan. Installment settlements are possible but typically result in smaller discounts and may include acceleration clauses that reinstate the full judgment balance if the debtor misses a payment.

Satisfaction of Judgment

Once the settlement payment is made, the creditor must file a satisfaction of judgment with the clerk of court. The satisfaction discharges the judgment lien from the public records. Without a recorded satisfaction, the judgment continues to cloud the debtor’s title to real property and appears in public records searches.

If a creditor refuses to file a satisfaction after receiving full payment, the debtor can petition the court to compel it. The debtor should retain proof of payment, including wire transfer confirmations, cashier’s check copies, or the settlement agreement itself, as evidence that the obligation has been satisfied.

For settlements involving less than the full judgment amount, the debtor should obtain the creditor’s executed satisfaction before or simultaneously with delivering the settlement payment. Delivering payment before receiving the satisfaction creates a risk that the creditor will take the money and delay or refuse to file the required documents.

Tax Consequences

When a creditor accepts less than the full judgment amount, the forgiven portion may constitute cancellation-of-debt income under the Internal Revenue Code. A creditor that forgives more than $600 is required to file IRS Form 1099-C reporting the cancelled amount as income to the debtor.

The insolvency exception under IRC § 108 excludes cancellation-of-debt income to the extent the debtor’s total liabilities exceed total assets at the time of the cancellation. A debtor whose liabilities substantially exceed assets, which is often the case for someone settling a judgment, may owe no additional tax on the forgiven amount. The debtor must file IRS Form 982 to claim the exclusion.

Not all settlements trigger a 1099-C. If the original claim was disputed and the settlement resolves the dispute rather than forgiving an acknowledged debt, the IRS treats the payment as a settlement of a contested liability rather than debt cancellation. The distinction depends on whether the debtor genuinely disputed the underlying obligation.

Settlement vs. Bankruptcy

Debtors facing a judgment should evaluate settlement alongside bankruptcy as alternative resolution paths.

Factor	Settlement	Chapter 7 Bankruptcy
Cost	Negotiated payment (often 10–50% of judgment)	Attorney fees plus trustee administration
Credit impact	Judgment satisfied on record	Bankruptcy filing on record for 10 years
Timeline	Days to weeks	Four to six months
Asset risk	Debtor retains all assets	Trustee may liquidate non-exempt assets
Scope	Resolves single judgment	Discharges all qualifying debts
Control	Debtor and creditor negotiate terms	Court and trustee control the process

Settlement is generally preferable when the debtor faces one or two judgments and has the resources, or can borrow from family, to fund a lump-sum payment. Bankruptcy makes more sense when the debtor faces overwhelming debt from multiple creditors that cannot be resolved through individual negotiations.

The bankruptcy threat itself is a settlement tool. A creditor who believes the debtor will file Chapter 7 knows that bankruptcy would discharge the judgment and leave the creditor with nothing. Retaining an attorney who practices both asset protection and bankruptcy law signals to the creditor that the debtor has realistic alternatives to paying the full judgment amount.

Settling Multiple Judgments

A debtor facing several judgments must prioritize. Secured creditors and judgment lienholders with liens on specific property should be addressed first because they can force a sale of the encumbered asset. Unsecured judgment creditors have fewer immediate collection tools and are generally more willing to negotiate.

Federal judgments—including IRS tax debts and federal agency judgments—present different settlement dynamics because federal creditors have collection powers that bypass many state exemptions. The IRS offer-in-compromise program has its own formula for calculating acceptable settlement amounts based on reasonable collection potential.

The judgment collection framework in Florida gives creditors a defined set of tools. Understanding each tool’s limitations is what transforms a settlement negotiation from a plea for mercy into a strategic transaction where both sides benefit from resolving the judgment efficiently.