Negotiating A Settlement Agreement in Court

This page offers information and advice for people who have been sued in the NYC Civil Courts and want to negotiate a settlement agreement in court with the plaintiff’s attorney. General information about negotiating with debt collectors is available at our Negotiating with Debt Collectors page.

What is a settlement agreement?

A settlement agreement is an agreement between you and the plaintiff that resolves the court case without a trial or a judgment. In most cases, the settlement agreement will include a payment plan.

Is it always a good idea to negotiate a settlement agreement?

No. A settlement agreement is one way to resolve a lawsuit, but it is not the only way. It is sometimes better to defend the case by asserting your defenses and demanding that the plaintiff come forward with proof of the debt.

When should I consider a settlement agreement?

The decision whether to settle a debt collection lawsuit is personal, and every situation is different. However, you might want to consider a settlement agreement if:

You believe you owe some or all of the debt;
The debt is fairly recent; and,
You can afford to make payments.

You might also consider settlement if you cannot take time off from work to attend court dates.

When should I NOT consider a settlement agreement?

You probably should not consider a settlement agreement if:

You can’t afford to make payments.
The debt is so old that the statute of limitations has expired or is about to expire.
You are the victim of identity theft, or you don’t owe the debt for some other reason.

If your income is exempt from debt collection because it comes from a protected source, such as Social Security, Public Assistance, the Veterans Administration, child support, or a pension, you probably should not consider a settlement agreement unless you are sure that you can afford to make payments.

Can I negotiate a settlement outside of court, so that I do not have to appear?

You can certainly try. However, you should be aware that when you call the office of the plaintiff’s attorney, you will most often talk to a debt collector and not an attorney. People often find that these debt collectors are rude and unreasonable. However, the attorneys that you will meet in court are usually polite and have much greater flexibility to work with you. The attorneys want to reach an agreement with you because they know that they might not be able to get proof of the debt, which they need to win a case against you. Most people find that they can get a much better deal by going to court than they can by negotiating over the telephone.

Also, you should remember that every time a case is pending in court, there is a serious risk that the court will enter a default judgment against you if you fail to appear. You cannot trust the plaintiff’s attorney to do the right thing and inform the court that the case has been settled. The only way to make sure that no judgment is entered against you is to file an answer and appear in court on your court date.

If you do decide to negotiate an agreement over the telephone, make sure to get the agreement in writing. If you cannot get an agreement in writing, you have no choice but to appear in court to protect your interests.

How should I prepare to negotiate a settlement agreement?

Learn about your rights and defenses. See The Basics of Defending Creditor Lawsuits

and Common Defenses to Creditor Lawsuits.

Think carefully about what you can afford to pay. If you cannot afford to pay anything at all, you should not enter into a settlement agreement. For most people, paying for necessities like shelter and food is more important than paying credit card debts.

If I can afford to make payments, how do I get the best deal?

Decide how much you can afford to pay, and offer less. That way, you’ll have some room to bargain. Be firm, and never agree to pay more than you can afford.
If you can afford it, offer a lump sum. Creditors will often agree to give you a substantial discount in exchange for a larger payment.
Stay calm and in control, no matter what the attorney says.
If the attorney refuses to come down to an amount you can afford, consider walking away from the deal. Remind the attorney of your defenses and insist on seeing proof of your debt.

What should I look for in a settlement agreement?

There are a few things to look for in every settlement agreement to make sure your rights are protected.

The creditor should reduce the overall amount of the debt.
The creditor should give you a monthly payment that is affordable over the long term.
The creditor should waive interest, fees, and court costs.
The agreement should provide that no judgment will be entered against you (unless you fail to make payments).
The agreement should provide that when you finish making payments as agreed, the case will be discontinued.
The agreement should provide that if you miss a payment, the creditor will give you written notice and an opportunity to send in a late payment. This is called “notice and an opportunity to cure.” Try to get at least 10 days to send in your late payment.

What should I watch out for in a settlement agreement?

Do not sign an agreement that says that you consent to a judgment.
Do not give the attorney your bank account information or allow the attorney to take automatic deductions from your checking account.
Most settlement agreements provide that if you miss a payment, the plaintiff can enter a judgment against you for the full amount plus interest, court costs, and legal fees. Therefore, take care to ensure that you will be able to make the monthly payments and complete your part of the agreement. Do not set yourself up for failure by making an unaffordable agreement. The notice and opportunity to cure, discussed above, is also important for your protection.

If the plaintiff’s attorney gives me a settlement agreement on a pre-printed form, can I make changes to it?

YES. The attorney’s printed form is not an official court document. Sometimes pre-printed forms contain unfair provisions that can harm you. You can and should make changes to the pre-printed form if necessary to protect yourself. If you do not understand what is written on the form, you should ask for a meeting with the court attorney. The court attorney can sit down with both parties and help you to come to an agreement that seems fair to both sides.

More Information

How to Read a Civil Court Summons (PDF)

Common Defenses to Creditor Lawsuits

Preparing for Your Court Date

Vacating a Default Judgment

Frozen Bank Accounts

Wage Garnishment

What is Exempt from Debt Collection?

Helpful Links and Resources

LawHelp/NY: attorney referrals and information for pro se litigants

National Association of Consumer Advocates: national database of consumer lawyers

New York City Civil Court: information about representing yourself in court, including contact information and court forms

eCourts: information about cases filed in New York courts

Laws of New York: complete text of New York laws

Disclaimer: This site provides general information for consumers and links to other sources of information. This site does not provide legal advice, which you can only get from an attorney. New Economy Project has no control over the information on linked sites.