Can I Pay a Creditor Less Than I Owe?

Several readers have recently asked, in different ways, whether a creditor must accept partial payments if that’s what only what those in debt can afford.

One was paying off a large hospital bill, $50 at a time, and was told her monthly payments needed to be substantially larger. Another had been told to pay a bill for $1,600 in full or to pay $350 a month; she told the debt collector she could afford only $100 a month. Her husband, James, wanted to know if it was legal for the debt collector to refuse to accept less. A third reader, Jose, thought he had negotiated a discount and he sent in a partial payment. Now the collector is returning the partial payment and asking for payment in full.

All three want to pay their bills, but don’t think they can do so on the terms they have been offered. If they send in payments, is there an obligation to accept them?

First, if you’re in debt, you don’t get to set the repayment terms. You may, however, have some room to negotiate. Collectors are smart enough to know some money is better than no money, and their job is to get you to pay as much as possible as quickly as possible. Try to work out a payment arrangement that you can stick with, and if you do, be sure to get it in writing before you pay. If the debt winds up in court, you’ll want documentation of your agreement.

As for the specific situations, the woman paying $50 a month on a hospital bill may have an “implied contract,” says Jonathan Ginsberg, a consumer finance attorney in Atlanta. (An implied contract is one in which a contract is implied by the actions of the parties.) In the absence of a written contract, there might be a way to document her intentions. “In some jurisdictions a note on the check could help as well, i.e. ‘payment 2 of 60.’ At the very least, it might give the debtor more leverage in a final written settlement,” Ginsberg wrote in an email. If the hospital chose to go to court, Ginsberg said, the fact that she had been paying might well influence a judge.

But it’s not guaranteed. (A possible issue, Ginsberg said, would be if the patient contract disallowed implied contracts.)

And the couple being asked to pay $350 a month who told the collector they could afford $100? The debt collector isn’t obligated to accept less, says Credit.com Director of Consumer Education Gerri Detweiler. “Collectors aren’t required to accept whatever you can afford to pay, and there is a misconception that if you send them something they can’t take further action against you. That’s not necessarily the case.”

In Jose’s case, it’s possible there was a misunderstanding about the agreement negotiated over the phone, or that the collection agency simply decided to try to collect more. That’s why it’s crucial to get a written record of any agreement. “Unless there is evidence that the debt collector lies about deals on a regular basis, a judge considering the case would default back to the written, non-discounted contract,” Ginsberg said.

If you’re late on debt payments, or having to make partial payments on a debt, your credit will most likely be affected. This is why it’s important that you keep an eye on your credit reports and credit scores. By checking your credit reports — which you can do for free once a year from each of the three credit reporting agencies — you can keep an eye on how your payments are being reported. From there you can take actions to correct any errors, or work toward getting your credit back on track by addressing any derogatory items.

Your credit scores will also likely reflect any payment issues, but it’s still important to monitor your scores to know where you stand. Monitoring your scores regularly, even through difficult periods, can help keep you invested in working toward better credit. You can monitor your credit scores using a free tool like Credit.com’s Credit Report Card, which updates your credit scores monthly and gives you a breakdown of your standing across the five factors that influence your credit.