What Is A Debt Settlement Agreement?

Dena Standley | August 03, 2023

Edited by Hannah Locklear

A settlement agreement can help you bypass the lengthy and costly litigation process. For example, you can offer to settle instead of enduring a debt collection lawsuit. The court will dismiss the case if the debt collector accepts your offer.

The settlement agreement is a legally-binding document whose terms both parties must fulfill. So, before agreeing to or offering your opponent a settlement agreement, you must understand how these documents work and what you should request. You also need to ensure the settlement offer is selling you well.

Keep reading to learn a bit about settlement agreements. Then we will discuss what you need to ask for in yours.

What is a settlement agreement?

Whenever you are part of a dispute, like in a civil case, you can resolve your issues in or out of court. The decision you make depends on the type of dispute and each party's willingness to find a resolution. Settlement agreements are often reached after arbitration. If you have been sued, SoloSuit can help you force the suit out of court with a Motion to Compel Arbitration.

If you settle a disagreement outside the court, you typically need a settlement agreement. The document states the terms under which the court may dismiss an ongoing lawsuit.

The party making the offer should sign in acceptance of the conditions therein. It is good practice for the opponent to sign and date to show that they agree with you.

In essence, the settlement agreement outlines the resolution to a dispute. Opposing parties negotiate, compromise, and sometimes change the terms before reaching an agreement.

Settlement agreements serve in almost all areas of life. Such agreements can help resolve issues resulting from:

• Property allocation in divorce
• Employment disputes
• Personal injury
• Defective products
• Medical malpractice
• Debt collection lawsuits

A well-drafted settlement agreement should contain all the necessary details. If you are the one drafting the document, include the following:

• Full names of both parties.
• Detailed recitals (incidents that caused the conflicts).
• Terms of release.
• Consideration (Specific payable amounts or conditions that one or both parties must implement).
• If a lawsuit is already in court, include the case name.

Remember that a settlement agreement does not address liabilities. Its sole purpose is to bring the dispute to an end.

Also, the court only enforces the agreement as is. It is not the judge's duty to set the settlement conditions for you. So it is best to research and determine the facts of the case and the best outcome a settlement agreement can provide. You may need a lawyer to help you draft the document.

What to ask for in a settlement agreement

As we have mentioned, settlement agreements work for all kinds of disputes. So what you include will depend on the issue you hope to settle.

In general, any a settlement agreement should ask for the following.

Determine the terms

When drafting a settlement agreement, you should ask that the opposing party agree to the settlement's terms. For instance, a debt collector can accept to withdraw a lawsuit. Let’s explore an example.

The consideration

The consideration is the offer that ends the dispute. For instance, in a debt collection lawsuit, it is the amount of money you are offering. In a different type of dispute, it may not involve money; such as when you and your soon-to-be ex-spouse agree to split babysitting duties equally.

Suppose you are injured in a car accident and prefer to resolve the issue without a lawsuit. In the personal injury Settlement Agreement, you can ask the driver who hit you to pay $1,000 in medical bills (if that's the cost you incurred) and an additional $5,000 for loss of income during recovery.

SoloSuit has a proven history of helping consumers settle debt collection lawsuits for much less than they owe.

Use SoloSettle to settle a debt collection lawsuit fast.

Set a deadline for implementation.

You should state any deadlines for both parties taking or stopping specific actions.

For example, if you propose a debt settlement amount, mention the date you must make the payment.

Set the date of effectiveness

The settlement agreement typically releases one or both parties from a possible future action, such as a lawsuit. Therefore, you should mention the date when the contract goes into effect. Is it on the day both parties sign, or is it when the court dismisses the case?

Both parties should clearly understand and agree with the set dates.

Ask the other party to sign the agreement

Remember to sign and date the settlement agreement. You should also allow space for your opponent to sign and date. Any mediators or witnesses present can also sign, although this is usually unnecessary.

Debt settlement agreement example

Like other settlement agreements, a debt settlement agreement is a legal document that is filed into a debt collection lawsuit when the two parties have reached a consensus on how to resolve the dispute.

Below is an example of a debt settlement agreement in a South Carolina debt lawsuit:

Why should you consider a debt settlement agreement?

Debt settlement agreements can be a lifesaver if you are facing a debt collection lawsuit. They take away the stress, time, and money that come with court cases.

Many debt collectors are willing to settle a debt for less than the original amount owed.

However, before signing a settlement agreement, you need to be sure that you understand and agree with the terms. You should also state your demands and clearly explain the reason for the dispute, as shown in this sample debt settlement agreement.

Keep in mind that once the court dismisses the case, it is not under obligation to mediate between you and your opponent. The judge can only enforce the terms of the contract. So, only sign when you are satisfied.

You may need to speak with an attorney to get the legal advice you need. Or you can check out our article on How to Make a Debt Settlement Agreement.

Settle your debt with SoloSettle..

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to answer a summons for debt collection in your state

Here's a list of guides for other states.

All 50 states.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Guides on how to beat every debt collector

Being sued by a different debt collector? Were making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Cypress Financial Recoveries
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Fulton Friedman & Gullace LLP
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mannbracken
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• Nationstar Foreclosure
• Northstar Capital Acquisition
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Pallida LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• Provest Law
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• Regents and Associates
• RSIEH
• Salander Enterprises LLC
• Second Round Sub LLC
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group
• Weinberg and Associates
• Wolpoff & Abramson

Win against credit card companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get answers to these FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendants Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouses Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

How Does Debt Assignment Work?

What Happens If a Defendant Does Not Pay a Judgment?

How Does Debt Assignment Work?

Can You Serve Someone with a Collections Lawsuit at Their Work?

What Is a Warrant in Debt?

How Many Times Can a Judgment be Renewed in Oklahoma?

Can an Eviction Be Reversed?

Does Debt Consolidation Have Risks?

What Happens If You Avoid Getting Served Court Papers?

Does Student Debt Die With You?

Can Debt Collectors Call You at Work in Texas?

How Much Do You Have to Be in Debt to File for Chapter 7?

What Is the Statute of Limitations on Debt in Washington?

How Long Does a Judgment Last?

Can Private Disability Payments Be Garnished?

Can Debt Collectors Call From Local Numbers?

Does the Fair Credit Reporting Act Work in Florida?

The Truth: Should You Never Pay a Debt Collection Agency?

Should You Communicate with a Debt Collector in Writing or by Telephone?

Do I Need a Debt Negotiator?

What Happens After a Motion for Default Is Filed?

Can a Process Server Leave a Summons Taped to My Door?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

Youre Drowning in Debt — Heres How to Swim

Help! Im Being Sued by My Debt Collector

How to Make a Motion to Vacate Judgment

How to Answer Summons for Debt Collection in Vermont

North Dakota Statute of Limitations on Debt

ClearPoint Debt Management Review

Indiana Statute of Limitations on Debt

Oregon Eviction Laws - What They Say

CuraDebt Debt Settlement Review

How to Write a Re-Aging Debt Letter

How to Appear in Court by Phone

How to Use the Doctrine of Unclean Hands

Debt Consolidation in Eugene, Oregon

Summoned to Court for Medical Bills? What to Do Next

How to Make a Debt Settlement Agreement

Received a 3-Day Eviction Notice? Heres What to Do

How to Answer a Lawsuit for Debt Collection

Tips for Leaving the Country With Unpaid Credit Card Debt

Kansas Statute of Limitations on Debt Collection

How to File in Small Claims Court in Iowa

How to File a Civil Answer in Kings County Supreme Court

Roseland Associates Debt Consolidation Review

How to Stop a Garnishment

Debt Eraser Review

Do Debt Collectors Ever Give Up?

Can They Garnish Your Wages for Credit Card Debt?

How Often Do Credit Card Companies Sue for Non-Payment?

How Long Does a Judgement Last?

​​How Long Before a Creditor Can Garnish Wages?

How to Beat a Bill Collector in Court