Form 1-6

This form may be used to establish a settlement with a debtor. The attorney must be careful to tailor the details of the agreement to the facts of the particular case.

If there is a lawsuit and the debtor is paying over time, consider securing the payment arrangement with an agreed judgment. The agreed judgment may be held in trust or filed immediately in the event you are practicing in a court that will set the case for trial or place it on the dismissal docket before the debtor completes the payment terms. If unsure about the court’s procedures, consider language that allows entering the agreed judgment immediately, such as the third optional paragraph 4 below.

Settlement Agreement Letter

[Date]

[Name and address of debtor]

Re:   Balance Due of $[amount] owed to [name of creditor] (the “Creditor”) by [name of debtor] (the [“Customer”/“Debtor”]) on the invoices described in Exhibit [exhibit num­ber/letter], incorporated herein by reference (the “Debt”) [include if a lawsuit is pend­ing: and Cause No. [number] in the [designation court], [county] County, Texas, styled “[style of case]” (the “Lawsuit”)]

[Salutation]

This letter memorializes the terms of the agreement (the “Agreement”) between the Creditor and the [Customer/Debtor] with respect to the Debt [include if applicable: and Law­suit].

1.The [Customer/Debtor] agrees to pay and the Creditor agrees to accept $[amount of settlement] in one lump sum on or before [date].

1.The [Customer/Debtor] agrees to pay and the Creditor agrees to accept $[amount of settlement] as follows: payments of $[amount of monthly payment] or more per month beginning on or before [date], and due on or before the [day of month] day of each successive month (the “Due Date”).

2.Payment should be made by CERTIFIED FUNDS payable to [name of payee] and forwarded to [payee’s address]. [Include the following if allowing the debtor to pay with personal or business checks: If payments are made by personal or business checks, the [Cus­tomer/Debtor] additionally agrees that, should a payment be returned for insufficient funds or dishonored for any reason, the Creditor may require future payments to be made by cashier’s check or certified funds.]

3.Should a Due Date fall on a weekend or recognized holiday, the Due Date shall be extended to the next business day.

4.As security for such payments, the parties agree to sign the Agreed Judgment attached hereto as Exhibit [exhibit number/letter]. The parties agree that the Creditor will not file, abstract, or enforce the Agreed Judgment as long as the [Customer/Debtor] is not in default, as defined in this Agreement.

4.As security for such payments, the parties agree to sign the Agreed Judgment attached hereto as Exhibit [exhibit number/letter]. The parties agree that the Creditor may sub­mit the Agreed Judgment for the judge’s signature and enter it of record but will not abstract or enforce the Agreed Judgment as long as the [Customer/Debtor] is not in default, as defined in this Agreement.

4.As security for such payments, the parties agree to sign the Agreed Judgment attached hereto as Exhibit [exhibit number/letter]. The parties agree that the Creditor may sub­mit the Agreed Judgment for the judge’s signature, enter it of record, and, in the Creditor’s sole discretion, abstract the Agreed Judgment, whether or not the [Customer/Debtor] is in default.

5.Time is of the essence. If the [Customer/Debtor] becomes the subject of a bank­ruptcy, receivership, or any similar proceeding on or before the expiration of ninety-one (91) days following the date of the last payment required under paragraph 1, or if a payment is dis­honored, returned for any reason, or not received by the Due Date, the [Customer/Debtor] will be in default without further notice of default, notice of intent to accelerate, or notice of accel­eration, all of which the [Customer/Debtor] hereby waives.

5.Time is of the essence. If the [Customer/Debtor] becomes the subject of a bank­ruptcy, receivership, or any similar proceeding on or before the expiration of ninety-one (91) days following the date of the last payment required under paragraph 1, or if a payment is dis­honored, returned for any reason, or not received within seven (7) days of the Due Date, the [Customer/Debtor] will be in default without further notice of default, notice of intent to accelerate, or notice of acceleration, all of which the [Customer/Debtor] hereby waives.

5.Time is of the essence. If the [Customer/Debtor] becomes the subject of a bank­ruptcy, receivership, or any similar proceeding on or before the expiration of ninety-one (91) days following the date of the last payment required under paragraph 1, or if a payment is dis­honored, returned for any reason, or not received within seven (7) days of the Due Date, the [Customer/Debtor] will be in breach. In such event, the Creditor will send the [Customer/Debtor] a notice of breach by [certified mail, returned receipt requested/e-mail] to [address]. If the Creditor receives all past-due payments by cashier’s check, money order, wire, or certi­fied funds from the [Customer/Debtor] within ten (10) days of the date listed on the notice of breach, the [Customer/Debtor] will have cured the breach. If the Creditor does not receive all past-due payments from the [Customer/Debtor] within ten (10) days of the date listed on the notice of breach, the [Customer/Debtor] will be in default. The [Customer/Debtor] agrees that the [Customer/Debtor] will have no more than two (2) opportunities to cure a breach per cal­endar year.

6.Unless otherwise stated herein, nothing in this Agreement requires the Creditor to accept late payments. The acceptance of any late payments by the Creditor will not cure or excuse the [Customer’s/ Debtor’s] default. The parties agree that, should the Creditor accept a payment after the [Customer/Debtor] is in default, the [Customer/Debtor] will remain in default regardless of the number of late payments accepted.

7.If the [Customer/Debtor] is in default and regardless of whether the Creditor has accepted any late payments, the [Customer/Debtor] agrees that this Agreement remains entirely enforceable and that the full amount of $[amount of original debt] is immediately due and owing, in addition to prejudgment interest and attorney’s fees, less any amounts paid under this Agreement.

8.If the [Customer/Debtor] is not in default, upon full payment of the Debt, the Debt and all related fees and expenses will be considered settled.

8.If the [Customer/Debtor] is not in default, upon full payment of the Debt, the Debt and all related fees and expenses will be considered settled, and after [the payment has cleared our bank/the expiration of ninety-one (91) days after the date of last payment], the Creditor or its attorney will file a notice of nonsuit with prejudice in the Lawsuit.

8.If the [Customer/Debtor] is not in default, upon full payment of the Debt, and after [the final payment has cleared our bank/the expiration of ninety-one (91) days after the date of last payment], the Creditor or its attorney will execute a release of judgment to the [Customer/Debtor] and forward it to the following address: [address]. The parties agree that it will be the sole responsibility of the Judgment Debtor to file the release of judgment in any county in which the Judgment was recorded. The parties further agree that the Debt and all related fees and expenses will be considered settled.

9.The [Customer/Debtor] releases and forever discharges the Creditor, its affiliates, officers, directors, principals, shareholders, parents, subsidiaries, members, auditors, accoun­tants, predecessors, successors, servants, employees, agents, counsel, partners, insurers, underwriters, administrators, executors, representatives, heirs, and assigns from any and all past, present, or future claims that have accrued, or may accrue later, or otherwise be acquired on account of, or in any way arise out of, the Debt and the goods and services made the sub­ject of the Debt, whether known or unknown, and whether based on a tort, contract, or other theory of recovery.

9.The [Customer/Debtor] releases and forever discharges the Creditor, its affiliates, officers, directors, principals, shareholders, parents, subsidiaries, members, auditors, accoun­tants, predecessors, successors, servants, employees, agents, counsel, attorneys, partners, insurers, underwriters, administrators, executors, representatives, heirs, assigns, and anyone else acting for the Creditor from any and all past, present, or future claims, whether known or unknown, and whether based on a tort, contract, or other theory of recovery.

9.As long as the [Customer/Debtor] is not in default and the Debt is paid in accor­dance with the conditions described, the parties further release and forever discharge each other, their affiliates, officers, directors, principals, shareholders, parents, subsidiaries, mem­bers, auditors, accountants, predecessors, successors, servants, employees, agents, counsel, attorneys, partners, insurers, underwriters, administrators, executors, representatives, heirs, and assigns from any and all past, present, or future claims that have accrued, or may accrue later, or otherwise be acquired on account of, or in any way arise out of, the Debt and the goods and services made the subject of the Debt, whether known or unknown, and whether based on a tort, contract, or other theory of recovery.

10.No amendment or modification of this Agreement, and no waiver, discharge, or termination of any one or more of the provisions in this Agreement, shall be effective unless in writing and signed by all the parties.

11.By signing below, the [Customer/Debtor] acknowledges that this Agreement is made to satisfy a valid and existing claim as stated above. [Include if the debt is disputed: By signing below, the [Customer/Debtor] acknowledges that this Agreement is made to settle a disputed claim.]

If this correctly memorializes the terms of agreement between the [Customer/Debtor] and the Creditor, please indicate your approval of the terms stated in this letter by signing, dat­ing, and returning a copy of this letter to me today.

This Agreement is neither valid nor enforceable until all parties have signed.

By signing below, I am agreeing to the terms stated in this letter.

[Customer/Debtor]:

By:      

   
Signature

   
Printed Name

   
Title

Date: ________________

 

Creditor:

By:      

   
Signature

   
Printed Name

   
Title

Date: ________________