It is common for debtors to react to payment demands with settlement offers. Our response is to insist on full payment. Usually that works, but nothing works all the time. When we cannot obtain full payment we are left with the dreaded settlement offer. We don’t like it, you won’t like it and, in all probably, the debtor doesn’t like it either.
The debtor’s rationale doesn’t matter. Sometimes it is based on a genuine sense of ‘fairness’ as they see it. Sometimes it is based on their history of dealing with debt with settlements. Sometimes they think our clients are out to steal their money.
In truth, settlements are neither good nor bad. They are simply an offer to consider. The question is direct. Is it better for you to accept the offer litigate for the full amount or drop the claim with no collection but knowing the debtor’s credit will be affected?
There are three common responses to these offers. All of them are legitimate. I want to discuss them because they tend to produce dramatically different results.
Sometimes the response is based on anger over what the debtor has done. A trashed apartment, an Insurance check used to buy a vacation or a customer refusing to pay because of an imaginary failure tend to get all of us angry. I, personally, don’t tend to make my best decisions in this state.
The desire to harm the debtor as you were harmed is a normal response. It can be done with Credit Bureau reporting or obtaining a Judgment. This will usually prove satisfying but it comes at a high price. Anger doesn’t get much done when negotiating; just look at the Middle East. Two angry parties have almost no chance of getting anything either party wants.
All of us want fairness, but the term slips through our fingers like water. I would probably completely agree with your sense of the term, but debtors are looking at the conflict from the other side. They see you as greedy and unfairly taking advantage of them. They are also angry and many are ready to fight.
Clearly, your fairness is different from their fairness. This makes it almost impossible to obtain any positive results from negotiations using fair as the goal.
Negotiating money only works if it is stripped clean of all anger and fairness concerns. Money should always be negotiated in abstract form. When you link it to specifics such as item 3 of a bill it tends to degenerate to a discussion on fairness with a lot of anger infused in the dialogue. To make this work, you should talk dollars and only dollars. Don’t even think about the reason the bill wasn’t paid. Focus on what you want so you can get the best deal and move on to the next order of business.
You should carefully consider what is best for you and your company. Is it worth an your of your time to get an extra ten dollars? Does the debtor have future value as a customer? What do you need to break even? Getting some cash is almost always much better than getting revenge. Keep in mind that litigation is not free and only about one in four Judgments ever turn into money. That may shock you but it is reality. If you only get 25% in a settlement you will break even on the expected results of litigation. Of course, a settlement won’t require court costs or a day of your life in the court room.
One more thing to keep in mind is that debtors tend to be in poor financial condition. Their credit is probably already shot. Most of them don’t have jobs worth garnishing. Whatever you get in a settlement is better than going for broke. The real facts indicate that rejecting a settlement will get you exactly no money at all.
Fairness and revenge will only last until your next phone call. Cash will help your Company immediately. Go for the cash.
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ABOUT EXECUTIVE CREDIT MANAGEMENT, INC.
Executive Credit Management is a full-service Debt Collection and Applicant Screening agency with over 20 years experience located in Central New Jersey. We provide excellent service in the following areas: Employment Screening, Business Screening, and Tenant Screening. Executive Credit Management belongs to a number of Skip Tracing databases and offers services to help locate and confirm the current address of missing debtors. Other services provided are: litigation evaluation on all lawsuit decisions, improvement of the quality of the applicant data, Lawsuit Monitoring, Handling of Debtor Disputes. Executive Credit Management features the best Call Monitoring System in the Debt Collection industry.