When to settle through your debt collection agency

The decision of when to settle through your debt collection agency or attorney is all about the money. These types of settlement decisions can be stressful. Let me help make them easier. When you accept a settlement offer you receive part, but not all, of your claim. You need to balance this against what will happen if you don’t accept the settlement. Let me go over some very simple math.

If a claim is too small to warrant litigation, settlement rejections usually result in the receipt of zero dollars. The debtor’s credit will be hurt, but you will not benefit from that action. Sometimes you can try and get a higher settlement. This works about two thirds of the time and results in the total collapse of the settlement in the remaining one third of the offers. Original offers of less than 50% are much more likely to increase than offers over 50%. The Math says take settlements too small for litigation of half or higher.

Now let’s tackle larger claims; large enough to warrant litigation. Since my clients obtain Judgments for the full claim almost all the time you can expect to get a Judgment for the entire claim. Very good so far. If the claim is $1,000, the judgment will be slightly higher, but you will have to pay court costs which run between $175 and $550 depending on the court jurisdiction. In addition, you will have to pay higher fees (10%) adding an extra $100 in costs. Your original $1000 Judgment is only going to net you about $725.

But wait, it gets worse. Only about one in three judgments gets paid. In the other cases there are no assets and no job. While this is a third better than the average expectation for collecting with litigation it is sobering. The Debtor’s credit will be hurt again, but you will not get a dime for their suffering. Some debtors settle judgments in the future but not very many.

If there is no home ownership or job, the math says take settlements large enough for litigation of one third or higher. If there is a job where wages can be attached or home ownership, however, you are in a much better position. Most of these Judgments are paid so the math changes dramatically.

If the Debtor has a good job or owns a home you will get paid about 90% of the time. Some of those payments will take a few years, others will take longer. To get paid immediately and avoid additional fees and costs is still worth something. The math says to take settlements of at least 75% if the debtor has assets to attach.

I’m guessing many of you want more. So do we! You can get better settlement results by asking a few additional questions Applicant Screening. Depending on what you ask and what you do with the answers, your settlement average can increase significantly.
 

ABOUT EXECUTIVE CREDIT MANAGMENT, INC. 

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