Do debt collectors prefer lump sums or payment installments?
How age factors into the creditor's decision to go to trial
Last week, I wrote about the frustration of trying to negotiate settlements with companies who care only about money without actually needing money. These mega-companies are not under the constraints of a normal creditor, which needs money to pay its bills. So how do these companies decide the amount for which they will settle the case?
I don’t profess to have the inside knowledge about what these companies are “thinking.” But after negotiating hundreds of these cases, one thing has become apparent. At some point, a mega-creditor asked to decide which is more valuable: the less-than-full-amount settlement offer on the table or a judgment for the entire amount claimed in the lawsuit.
Let’s say the amount claimed in the lawsuit is $15,000. And my client (the debtor) says one of the following:
Answer 1: “I could pay $7,500 now in a lump sum to settle the case”
Answer 2: “I could pay $12,000 total at $300 a month.”
This puts an original creditor into the position of calculating whether the prospect of $7,500 now or payments over a period of 40 months for a total of $12,000 is worth more or less than a money judgment that is soon to be entered against the defendant/debtor.