Can I Settle a Debt Before I Go to Court?


An enforceable debt is a legal obligation to pay a creditor. If the debtor does not pay her debt or otherwise comply with the contractual obligations between herself and her creditor, the creditor can sue her to collect. A lawsuit does not necessarily mean the case will go to trial. Settlement outside of court may be possible.

Settling a Case

Settlement is generally always an option right up until the judge issues his final order. Parties do not have to settle, however, and before a settlement is effective or even viable, both parties must agree to the settlement terms. Settling a debt before going to court may be more likely when there is no genuine dispute about the debt, no applicable defenses and when both parties want to resolve the matter quickly and efficiently. Before considering a settlement, however, the parties must carefully analyze their case and seek legal assistance as necessary.

Settlement Pros and Cons

Settling before trial saves time and money, factors which are generally advantageous to both parties. Settling outside of court often keeps the agreement private and, according to MFY Legal Services, there is no judgment that shows up on the debtor’s credit report. However, by settling a case, the debtor gives up any applicable defenses. Further, certain debtors, such as those who are unemployed and are receiving government benefits, may be uncollectible anyway, meaning that the court may actually absolve the debtor of the debt.

Collection Lawsuit Defenses

When a person is sued for a debt, the creditor, as plaintiff in the case, must prove that the debt was valid. According to the Crowder Law Center in California, this means that the creditor must present valid proof in court; debtors may be able to defend the case if there is not enough admissible evidence to prove the case. The timing of the lawsuit can be a factor; old debts may be subject to a statute of limitations defense, but the time period varies by state. Actions taken by the creditor may reveal additional defenses, including fraud.

Other Issues

While settling a debt outside of court is possible, it is not always the best route to take. Defenses and the facts and circumstances of each case may warrant taking the lawsuit to trial. Each debtor’s situation is different. Seek legal assistance when contemplating settling or proceeding with any type of lawsuit, such as a debt collection lawsuit.

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