Settling a debt lawsuit without wrecking your position

Settlement is a legitimate outcome, and in many cases it is the right one. The mistake is settling before you know what the other side can prove.

Timing changes the number

Settlement leverage rises at three points:

1. After your Answer is filed. The case is no longer free for the plaintiff.
2. After discovery is served. Now they have to retrieve documents from a bank, which costs money.
3. After discovery responses are due and incomplete. This is the strongest moment.

An offer made before your Answer is the least favorable offer you will see.

Never settle verbally

Every term goes in a written agreement, signed by both sides, before you pay anything:

• The total amount and whether it resolves the entire claim
• The payment schedule, with dates and the payment method
• Dismissal with prejudice, filed with the court within a stated number of days after final payment. With prejudice means the claim cannot be refiled.
• Satisfaction of judgment filed, if a judgment already exists
• Credit reporting treatment: deletion of the tradeline, or updating it to paid or settled. Ask for deletion; get in writing whatever they agree to.
• No sale or transfer of any remaining balance to another collector
• Release of all claims related to the account
• Who bears costs and fees