Legal Question in Credit and Debt Law in California

I would advise against an oral settlement agreement. In any event, someone is going to have to file some paperwork, i.e., a dismissal of the action, and hopefully, they are dismissing the action with prejudice, otherwise, the creditor can file the suit again if it is being dismissed without prejudice. If you have no writing to reflect that the lawsuit is forever and finally settled, stating the exact agreement of the parties, who will pay what to whom and when, then I do not know how will you enforce the settlement.

I cannot advise an oral settlement agreement. This law is based in case law. The settlement agreement does not have to be lengthy, but I suggest that you jot down the basic terms and have both parties (not just the attorneys) sign the agreement. So, if the creditor is a national bank, then you want someone with authority to bind the bank to a contract to sign the settlement agreement on behalf of the bank.

Most banks want their own attorneys to draft their own settlement agreements. Have an attorney review it before you sign the agreement. The agreement should be negotiable; it should be a product after negotiation between the parties to the agreement.