Creditor has sued me and probably because I filed an answer instead of ignoring it, the creditor sent me a letter offering to settle at 25%. The answer I filed with the court had me DENY each paragraphed allegation and few affirmative defenses like "lack of privity" (unfortunately SOL did not apply). If I counter offer at 10%, would the court see this as admitting that I owe the debt and be detrimental to me? I think the court wants us to settle since no judgment was ordered yet.
Settlement offers, counter offers and discussion are deemed to be confidential and cannot be brought up at trial. Judges realize that parties settlement for many reasons, such as to end the nightmare of litigation, end the expense of going to court, etc etc.
You should consult an attorney regarding the settlement details. How will the creditor report the account to the credit reporting agencies? "Paid as agreed?" "Paid collection" "Delete tradeline" This should be negotiated and agreed to, in writing.
Will the creditor send you a Form 1099-C, requiring that you pay income tax on the amount of the debt that was forgiven?
No, a settlement or compromise is not seen as any admission of liability of the debt. In fact, the settlement cannot be used as evidence of liability. (See California Evidence Code section 1152).
By the way, if you settle, there should NOT be a judgment. The case should just be dismissed.
Frank W. Chen is licensed to practice law in the State of California. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.
Mr. Chen is correct. Statements made during settlement negotiations cannot be used as evidence at trial. Moreover, you can insert a phrase in the settlement agreement that the agreement has been reached solely to end the litigation and that the settlement shall not be construed as an admission of liability on the part of the defendant.
This response is for information purpose only and does not constitute a legal advice. This response does not create an attorney-client relationship.
The court hopes that all cases settle without the need for trials which are very time consuming. Settling is not necessarily an admission of liability. In fact many settlement agreements say just that.
Years licensed, work experience, educationLegal community recognition
Peer endorsements, associations, awardsLegal thought leadership
Publications, speaking engagementsDiscipline