Part 8: When/How to Settle Debt Litigation
It may not be obvious, but the best time to settle debt litigation is before it starts! But if that isn’t possible and litigation is the next step in turning up the heat on the debtor, then watch for every opportunity during the litigation. Before the debtor spends money on a lawyer, it may be easier to get more money to settle the claim.
If the debtor engages a lawyer, they are going to have to spend a great deal of money responding to the creditor’s formal discovery or Motions they might want to resolve the case. Of course, when the creditor and their lawyer can factually (or legally) refute the claims of the debtor, it may be time to discuss settlement.
Settlement can also mean payment in full, but over time. When that happens, the creditor’s lawyer should suggest a method that allows the creditor to “win” by default if the debtor doesn’t pay as agreed. An example might be a stipulation that calls the entry of a judgment for a certain amount, but payments of a lesser amount over time to be accepted as full payment if made timely.
If it turns out that the cost of prosecuting the case (witness, maybe expert witness, depositions, etc.) outweigh the benefits, perhaps authorizing counsel to take a low settlement would be preferable to just walking away and everyone losing their investment in the case.