It is rare that anybody involved ever likes a settlement. It is common for both parties to feel cheated. As a major contributor to the pain of settlements, I still regularly report such offers to my clients, fully aware that you won’t often like what you hear.
Often I have spent several sessions with a debtor trying to get them to raise their offer as high as I think I can get. It is never high enough, not for you and not for me. Still I do it and will notify you with the offer knowing full well that you won’t like it either.
Am I a masochist who likes being punished? Not by any stretch of the imagination. What I am is a person focused entirely on getting a client the most money possible.
My first job is to try and get full payment and that does happen most of the time. Sometimes, however a debtor refuses to pay either anything or the full bill. In these cases I switch to settlement mode. I do it to obtain an offer I can compare with the alternatives.
These alternatives are to sue or put the debtor on the Credit Bureaus without suit. Here are the factors I consider before I call you with an offer.
I know the factors and calculate the results. I can, with reasonable certainty, report when a settlement offer is worth taking. Not because it is reasonable or near 100% but because it will, on average, return more money to a client than the alternative options.
Let me give you two examples. A debtor offers $200 on a $400 claim. The debtor has bad credit. Suit is more costly than it is worth. The debtor has almost no possibility of ever wanting to fix credit and a Judgment would be worthless since there are no assets or job.
Fifty percent is in no way a good settlement but I would strongly recommend that a client accept the offer. The alternatives would be costly and, on average, produce a negative return. Fifty percent in the plus column is much better than money in the minus column.
Now let’s take a claim where a debtor offers $4,000 on a claim of $5,000. This is a reasonable settlement and taking it might be a prudent choice. This debtor, however, has a good job and has had it for years. In addition the debtor owns a house and has a good credit rating. The court will allow an additional $1,000 in costs to be added to the judgment if the Client sues.
Here, the client is in a strong position to demand more. The judgment would be collected almost all of the time and access to funds is readily available. The negative is the possibility of a costly counter-suit which doesn’t happen often but does occur. I would still recommend that my client ask for more.
Needless to say, most settlements are not this clear cut and fall somewhere in between these examples. My job is to do the math and determine if the offer is going to benefit a client more than the alternatives. I do this based entirely on average results and without emotional input.
I realize that taking a smaller offer to avoid risk is often a good choice. A guaranteed payment is worth more than an anticipated payment with a 95% certainty. This, however, is only true if the offer approaches 95% of the debt. An offer of 60% should be rejected with a 95% of collection using litigation.
A client may have reason to dislike a debtor and want the debtor punished. I cannot help with that. My job is to return a maximum of money for each claim. Sometimes the reaction isn’t positive because a client doesn’t have the statistical information available. In debt collection, it’s all about the money.
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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.