SETTLEMENT PROCESS
At any time before a lawsuit is concluded, the parties may enter into a settlement agreement. If you do not have a valid legal defense to owning the money to the creditor and winning the lawsuit is unlikely, settling the lawsuit is a way for you to enter into a payment agreement that may be less than the amount alleged that you owe. Even if a settlement is not for a reduced amount, settlement will prevent post-judgment collection proceedings such as wage garnishment, or bank freezes (liens).
Settlement Percentages: Once a lawsuit has been filed, a creditor will not settle for as low amount as before the lawsuit was filed. This is because the creditor has incurred filing fees, court costs and attorney fees. The settlement percentage increases in direct proportion to the number of months in a payment plan. The law firms hired by the creditors to bring the lawsuits are given strict guidelines by their client, the creditors, regarding what percentages are acceptable to them.
Settlement Documents: Different creditors have different requirements for settlement documents depending on the settlement and the state. A dismissal of the lawsuit can usually be obtained if an agreement is reached to pay the amount owed in one (1) lump sum. However, if this is not possible and a payment plan is needed, the type of settlement document is either a Consent Judgment or a Stipulation.
In a Consent Judgment the Defendant signs a judgment for the full amount alleged in the Complaint including court costs. In addition, attorney fees may be added and statutory interest. In the Consent Judgment or a separate settlement letter, the Creditor/ Plaintiff agrees to accept a lower amount to satisfy the judgment in payments. If all the payments are made in a timely manner at the end of the payment plan the Plaintiff will file a Satisfaction of Judgement or Release of Judgment.
Statutory Interest: Every state has laws that allow interest to be added to a judgment. The interest rate is set by state statute and will change each year.
Property Lien: Settlement may not prevent a property lien from being placed on any real property you own. Some states have statutes that require a property lien to be filed anytime a judgment is entered, regardless of whether the judgment was consensual.
Default: If payments are skipped or paid late, the settlement will be in default and the settlement agreement considered to be null and void. You will then owe the full amount of the judgment plus the amount of interest that has accrued since the date the judgment was entered.
Stipulation: Some creditors in some states will agree to a Stipulation. The Stipulation will set forth the settlement agreement and payment plan and provide that the lawsuit will be conditionally dismissed. If the payment plan defaults, then the Stipulation provides that the Plaintiff can reopen the case without notice to the Defendant obtain a judgment for entire amount of the judgment, plus costs, attorney fees and accrued interest.
Signing the Settlement Documents: After a settlement has been reached in your lawsuit, you are typically required to sign the settlement documents and return the signed documents to Amerilit, who will then provide the signed settlement documents to the Plaintiff. Some states require the original signed settlement documents so you may be required to send the original signed settlement documents to the Plaintiff and a copy to Amerilit. It is very important that you sign the settlement documents and return them in a timely manner. Failure to sign the settlement documents may result in the settlement considered defaulted regardless of whether payments are being made as agreed. You should keep a copy of the signed settlement agreement for your personal records.
Continue making your monthly payments: It is very important that you continue to make your monthly settlement payments and make sure the settlement payments are timely made. savings account to make sure the settlement payments for your lawsuit are timely made. Some creditors will consider a late payment to void the settlement agreement even if they later receive the late payment. You will then owe the entire amount rather than the reduced settlement amount.
Late Payments: If you are ever in a position where you simply can’t make a monthly settlement payment, it is crucial that the Creditor/ Plaintiff is contacted before a settlement payment is missed. You may explain your circumstances to the law firm representing the creditor/ plaintiff and request that the law firm allow you to skip a payment and make it up later without the settlement being considered in default.
Disclosure/ Disclaimer: The information in this letter has been prepared for general information purposes only to permit you to learn more about our firm, our services, and the experience of our attorneys. The information provided is not a full analysis of the matters presented, may not be relied on as legal advice and is not to be acted on as such, may not be current and is subject to change without notice. Further, if you are not the person to whom this letter has been disseminated by American Litigation Law Group, PLLC (“Amerilit”) be aware that any use, reproduction, or distribution of this message is strictly prohibited.
[1] Document created by Mary S. Bruehl on 5-11-23; revised 8-7-23. Copyright © 2023 American Litigation Law Group, PLLC (“Amerilit”) All Rights Reserved; Use of the information contained in this letter may not be used or disseminated without permission of Amerilit.