It goes without saying that being in the position to even consider taking a settlement is discouraging. For a debt to get to this point with a customer is not what anyone intended at the onset of your professional relationship. But here you are, at the crossroads wondering which path is the best one to take.
The process you go through to make this decision isn’t really any different than what we outlined in our last post titled, Should I Accept A Payment Plan? You start with a lengthy and detailed conversation with your customer to obtain every ounce of information you can. With your detailed notes, verify what you’ve been told with other creditors. Contact your customer’s bank to see if a check would clear and request their last six months worth of Merchant Statements. From all of this information, you’ll be better equipped to answer the big money question for yourself:
Do they or do they not have the money to clear the debt they have with you?
If your conclusion is that your customer really has no money (or a very limited amount) to pay you and if you believe there’s a good chance you won’t get paid anything at all if things keep going the way they are, then it’s time to go for a settlement. Once your customer realizes this is the action you plan to take, it may be motivation enough for your customer to clear your debt with whatever limited funds he or she has or can muster up by some other means.
Your decision to take a settlement hinges on one thing … if there’s a strong likelihood that your customer won’t be able to financially honor an extended payment plan.
In the end, you may cut your losses and take a lesser amount. While this isn’t the best case scenario, it’s not the worst case, either – which is not getting paid anything. And we’d all agree on this point: getting paid something is always better than getting paid nothing.