Case Summary:
Trustee sought approval of settlement agreement with debtor. The primary creditor objected to the settlement and offered to “fund” ongoing litigation with the debtors. The trustee has the burden of demonstrating that a settlement proposal is both reasonable and in the best interests of the bankruptcy estate. The court must consider four factors when reviewing a proposed settlement: (1) probability of success in the litigation; (2) the difficulties, if any, to be encountered in collection; (3) the complexity of litigation and the expense, inconvenience, and delay associated with it; (4) the paramount interest of creditors and a proper deference to their reasonable views in the premises. The court found that despite the creditor’s promise to “fund” future litigation, all other circumstances supported approval of the settlement and the creditor’s perspective was unreasonable.