Settlement Agreements: How To Minimize Bankruptcy Risks In Settlement Agreements

Useful Advice In An Online Article.

    A problem sometimes arising in mediation is that while the parties may agree on a settlement amount, the defendant signals it may declare bankruptcy, putting the value of any settlement in doubt. How can bankruptcy risks be minimized in settlement agreements? I found an online article addressing this question on the Holland & Hart website to be useful. Rather than remake the wheel, here is a link to the article.

    I would, however, caution California practitioners to be careful with the discussion about preserving the full amount of the original claim in the event bankruptcy is declared, because there is a substantial amount of California law supporting the proposition that once a settlement amount is agreed upon, reverting to the full amount of the claim in the event that the settlement agreement is breached may constitute a penalty and forfeiture.