In business collections, a well-drafted settlement will end your lawsuit in 1 of 2 ways: either dismissal if your customer pays the settlement amount, or a judgment if it doesn’t. This article will discuss how a good Stipulation of Settlement provides for either contingency.
What Is A Stipulation Of Settlement
A Stipulation of Settlement is a written agreement filed with the Court that details your settlement, and should include terms that protect you. When you file the Stipulation, you’d normally ask the judge to So-Order it (i.e., to sign it into an Order), so the Court will enforce its provisions if the customer later breaches.
What To Include In A Collections Settlement
In a collections lawsuit, your Stipulation should state the settlement amount, when payments are due, what constitutes a default, and the consequence of paying or not paying.
Start with the full settlement amount and when it’s due. If there’s a payment plan, it should state the amount and date of each payment.
Next, it should specify what constitutes a default. For example, you might want a “time of the essence” provision (i.e., strict on-time payment), while your customer might want a grace period or even a notice of default and time to cure.
And it should state what happens if the customer does or doesn’t pay. If the customer pays the settlement in full, you should dismiss the lawsuit. And if it defaults, you should get a judgment for your full claim (not the settlement amount), less any settlement funds received, plus reasonable attorney fees.
As to attorney fees, if you’re paying a 1/3 contingency fee, for example, your Stipulation should state that fees equal to 33.3% of the balance will be deemed reasonable.
And it should direct the Clerk of the Court to enter judgment if you file a Certification setting forth the breach and amount due. As long as a judge has So-Ordered your Stipulation, the Clerk must enter the judgment.
In a business collections lawsuit, a properly-drafted settlement not only ends the litigation, but results either in the settlement payment or in a judgment for you full claim.
For more information on business collections, or if you’d like to discuss a specific collection issue, call me at 856-667-1669 or contact me here.
This material is for informational purposes only and should not be construed as legal advice. No person should rely on this information without seeking the advice of an attorney.