When faced with a financial condition that is deteriorating for any reason, many creditors are willing to work with you IF they understand your situation. Two of the biggest reasons for bankruptcy filings are medical conditions and divorce. Both of these situations are serious situations that most creditors will understand. Also, creditors should understand that if you have a bona fide issue that is preventing you from paying your debt, then making an agreement to work with you ensures that they retain you as a client, build better customer relations, and that they will be paid either partially or over a longer period of time. By contrast, if a creditor is unwilling to discuss your situation with you, your account will likely be turned over to a collection agency and the creditor typically receives little or no payment for the debt they own. Sometimes you should discuss your situation with your creditor and sometimes not. A few simple rules are that (1) you should never agree to play more than the original debt, (2) you should never agree to pay more than you are capable of paying, and (3) you should discontinue the discussion with the creditor if it appears that they are unwilling to help you and are instead trying to obtain information for later use in a collections lawsuit.
Creditors do not want your debt to go to collections. They often can only collect pennies on the dollar from whatever the collection agency collects. Collection agencies are often unsuccessful in collecting debts, so creditors further understand they may not collect anything from a debt that has been turned over to a collections agency.
Negotiating your debt with a creditor can be a complex scenario and you may wish to retain the help of a professional such as an attorney to help with the negotiations. An attorney should be skilled in determining whether the creditor is willing to negotiate with you or not.
In reality, it is in both the best interest of the debtor and the creditor to work out an arrangement that works for both parties. This can help to prevent the customer from falling into debt that is difficult to recover from and ensures that the creditor can recover a maximum amount on the debt that is owed.
This article contains material of general interest and should not be construed as legal or financial advice or a legal opinion on any specific facts or circumstances. This content may not be relied upon as personal, legal, or financial advice. This article does not include legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.