Informal Settlement Agreements

A relatively rarely used Family Code provision enacted in 2005 codifies the use of the “Informal Settlement Agreement” and makes it an especially effective aid in settling a divorce case.  As long as the settlement document specifically and prominently provides that it is not subject to revocation and is signed by all parties and attorneys, a party is entitled to a judgment on the terms of the agreement.  Effectively this gives the informal settlement agreement a very similar level of enforceability as a mediated settlement agreement and avoids issues that have arisen in the past regarding whether a party in a divorce case has the right to revoke a Rule 11 settlement agreement prior to entry by the court.

It is very common in my practice to use an informal settlement agreement early in a case.  When sufficient information exists to address all issues it can be very helpful to make an early offer via an informal settlement agreement, ideally in the first month or so in the case.  This will often settle the case outright, or at least begin a settlement dialogue.  In my opinion in most cases this is far more advantageous to the client than waiting until the case is several months old.  In other words, I like to begin with the end in mind and at least attempt to settle the case in the early stages.  While the informal settlement agreement is a great tool in a divorce case, based on a precise reading of the statute its use is limited to divorce cases.   As stated in the statute, “the parties to a dissolution of a marriage may agree” to reach an informal settlement agreement.  Thus, the statute appears to not apply to other family law issues such as paternity cases or modification cases and those cases are still limited to the use of mediation agreements or rule 11 agreements.

It is important to note that some cases are not good candidates for the early use of an informal settlement agreement, such as ones that require immediate temporary orders or where the client has insufficient information on the finances and discovery will be needed.  But in a typical divorce case it can be extremely helpful in reaching a reasonable resolution early, before the parties have expended a great deal in attorneys fees or gotten overly contentious about the case.

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Scott Morgan is Board Certified in Family Law by the Texas Board of Legal Specialization. He has practiced family law since 1994 and is the founder of the Morgan Law Firm which is dedicated exclusively to representing divorce and family law clients in the Houston and Austin areas.

4 Responses to Informal Settlement Agreements

  • Hi,

    One of the reasons not to have an informal property settlement is because of the impact that tax (especially capital gains tax) and stamp duty can have. Exemptions are granted when consent orders are entered into, and may also be available when a binding financial agreement is also entered into.

  • Scott says:

    The tax issue described above may have an impact in other jurisdictions, but it is not applicable in the state of Texas. A settlement under an ISA is given the same tax treatment as any other form of settlement, at least here.

  • Denise says:

    An early settlement offer also shows you where the opposing side stands, and it is an early indication of how likely they are to settle.

  • Jimmie Funk says:

    What happens if you sign a Rule 11. The date is next week to get the divorce, but the spouse is saying he wont come up with the check for the promise monatary amount the Rule 11 agrees to? Can party be thrown in jail for not honoring rule agreement? Can the judge do anything to him at this meeting, because he has been in complaint of order to pay my bills in our joint accounts, and he is keeping my income. Why do I have to set another date for something to happen to a liar who keeps postphone the inevitable?

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