Absolute Resolution Wants to Settle

[Newborn]

Hi All,
I wrote earlier that I was in the process of filing BK13, due to 2 lawsuits from Absolute Resolution. I filed my answer and their lawyers wrote me to see if I wanted to settle the debt. I have spoken to friends and family, who have agreed to loan/raise the funds. Is settling a better option. Secondly, what percentage is reasonable to offer.

Thank you all in advance

[womanonfire]

I settled debt before filing. You may receive a 1099-C for the amount that is discharged with the settlement as I did and you will owe tax on it. You'll have to weigh the advantages and disadvantages of it.

[justbroke]

A settlement is a negotiation and if they want you to make the first offer, then expect a counter that's higher than you made. I'm no strategist when it comes to settlements since I've have never done one. I am, though, good and well practiced in negotiations.

The way to test their appetite for a "good" settlement is to offer a low amount, such as 10%. That will test the waters and their counteroffer will show you what they think is a "good" settlement. Then you go from there. You do need to know your absolute high-watermark when it comes to the total settlement amount (or percentage). If you offer 10% and their counter is 80%, the next offer is 20% to test how far they move from the 80%. If they say 75%, then they don't want to give up much and you have learned that you are too far apart.

You have to know your zone in which you feel comfortable in settling (10%-50%) and your alternative if they are still in the 70%-90% range and won't budge. You have your alternative, bankruptcy. You can use that in the negotiation when you've come all the way to 50% (in your comfort zone) and they won't meet you there.

At least that is how I work in negotiated settlements in contractual disputes.

[NwodGniog]

Yes, I will echo the income tax implications of settling. They will send you a 1099-C and it will be treated as "other income" on your 1040, so you might end up owing quite a bit of taxes next year. Some people get out of paying the taxes by filing form 982 with their 1040 if they meet the IRS's very stringent definition of being insolvent. Very few people are seen as insolvent by the IRS.

[justbroke]

Very few people are seen as insolvent by the IRS.

... unless the debt was discharged in a bankruptcy. Bankruptcy and discharge are the easiest proofs on Form 982 (Box 1a).