An all too typical fact pattern involves a small-time ne’er-do-well infringing on the rights of a much bigger corporation. When the corporation is forced to bring a lawsuit, the “little guy” infringer cries poverty and seeks a settlement. An oft-used tactic of corporations is to settle the matter quickly (and before too much in attorneys’ fees has been incurred) for a relatively modest sum (or even no money at all) while also including a mechanism by which any breach of the settlement agreement triggers the filing of an agreed judgment for a large sum of money.

We’ve all seen it. The business opportunity looks enticing but is laced with risk about a potential bankruptcy filing down the road. As bankruptcy lawyers we are often asked how deals can be structured to prevent a potential bankruptcy filing.