How to Settle a Small Claims Case in Tennessee Before Trial

Going to trial is a gamble for both sides. The plaintiff might not get everything they asked for. You might lose and owe the full amount plus court costs. Settlement eliminates that uncertainty — and in Tennessee General Sessions Court, settling is often the smarter move for both parties.

Why Settle

Settlement isn't admitting defeat. It's a negotiated resolution where both sides agree to terms they can live with. The plaintiff gets paid (usually less than the full claim), and you get certainty — no risk of a judgment for the full amount, no surprise court costs, no 10-day appeal clock ticking.

From the defendant's perspective, settlement makes sense when:

• You owe some of the money but dispute the full amount
• The cost of preparing for trial (time off work, lost wages, witness coordination) exceeds the gap between what you'd offer and what you owe
• The plaintiff's claim has merit but their damages are inflated
• You want to avoid a judgment on your record

How to Negotiate Before Trial

You can contact the plaintiff (or their attorney) at any time before your court date to discuss settlement. There's no formal requirement — a phone call, email, or letter proposing terms is all it takes.

When proposing a settlement:

• Start with a specific number — not "let's work something out" but "I can pay $X by [date] to resolve this"
• Explain your reasoning — if you dispute part of the claim, say why (incomplete work, pre-existing damage, partial payment already made)
• Put it in writing — verbal agreements are hard to enforce; draft a simple settlement agreement that both parties sign
• Include a mutual release — both sides agree to drop all claims arising from the dispute
• File an Agreed Order of Dismissal — once you reach terms, submit a signed dismissal to the General Sessions Court Clerk to close the case

One critical point: reaching an informal agreement with the plaintiff does not cancel your court date. Unless the judge signs a formal order dismissing or continuing the case, both parties are still required to appear. If you stay home because you "worked it out" and the plaintiff shows up anyway, you risk a default judgment.

Rule 31 Mediation

Tennessee offers court-annexed mediation through Supreme Court Rule 31. The judge can refer your case to a Rule 31 Listed Mediator, or both parties can voluntarily opt into mediation through local community mediation centers (like the Nashville Conflict Resolution Center or the Community Mediation Center of Knoxville).

Mediation is different from trial:

• A neutral mediator facilitates the conversation — they don't decide the case
• Everything said in mediation is confidential under Rule 31 Section 10
• Offers and statements made during mediation cannot be used against you at trial under Tennessee Rule of Evidence 408
• If both sides reach an agreement, it's written up and submitted to the judge as a binding Consent Judgment
• If mediation fails, the case goes back on the trial docket — nothing you said can be held against you

In some counties (like Hamilton), the initial court date for self-represented parties is actually a mandatory mediation session, not a trial. If mediation doesn't resolve the case, the court schedules a separate trial date.

Mediation works best when both sides have a reasonable claim and the dispute is about money rather than principle. If the plaintiff genuinely believes they're owed $3,000 and you believe you owe $1,500, a mediator can often help you meet somewhere in between.

Paying Before Trial

If you know you owe the full amount and want to avoid court entirely, you can pay the principal plus accrued costs directly through the court clerk before the hearing date. This satisfies the claim and closes the case.

Don't pay the plaintiff directly and assume the case goes away. Unless an Agreed Order of Dismissal is filed with the court, the hearing stays on the docket. Pay through the clerk, or if you pay the plaintiff directly, get a signed release and file the dismissal paperwork immediately.

Installment Payments (Slow Pay)

If you can't pay a lump sum but want to avoid trial, you can propose an installment plan. Tennessee law provides a formal mechanism called a Petition to Pay by Installments under TCA Title 26, Chapter 2 — but you can also negotiate an informal payment plan directly with the plaintiff.

If you go the formal route, you file a petition and financial affidavit with the court clerk. The judge reviews your income, expenses, and dependents, then sets a monthly or bi-weekly payment schedule. As long as you stay current on payments, wage garnishments and bank levies are stayed.

The Tennessee Small Claims Response Guide covers every response option — contesting, settling, mediation, and installment payments — with step-by-step instructions for each path, so you can choose the strategy that matches your situation.

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