What Happens When a Creditor Refuses Payment?

When you use credit or borrow money, you still have to repay the creditor with regular payments. In some cases, creditors will refuse payments for one reason or another. If a creditor refuses to accept your payment, your account will remain unchanged and you may eventually find yourself in court.

Delinquent Payments

When you are delinquent on a loan and it falls into default, the creditor may not want to accept any payments. In some cases, when you break the terms of the loan or credit agreement, the creditor will simply want to foreclose on the property. When this happens, you cannot do anything to force your creditor to accept your payments. The creditor has the right to send your checks back or to return electronic payments to your account.

Partial Payments

In some cases, you may send in a partial payment that is less than the agreed-upon amount with your creditor. For example, you have a $500 per month minimum payment on your credit card and you send in a check for $100. When you take this approach, the credit card company may send the payment back because it is too small. Some creditors may simply accept the smaller payments and apply them to your account, but you are still in violation of the terms of your agreement.

Documentation

If you send money to a creditor and the creditor does not accept it, document the incident. Keep a copy of the check that you submitted and the letter or envelope that the creditor used to send the money back to you. If you had an electronic payment not processed, get a copy of your bank statement or credit card statement. This way, if you end up in court, you can at least show that you acted in good faith and tried to make payments.

Considerations

When the creditor refuses your payment, it may sue you in civil court for the debt. At that point, you will have to appear in court and present your case. Unless you can prove that you do not owe the debt, the court will issue a judgment in favor of the creditor. If you can show that you tried to make payments, the judge may be more lenient on you and allow you to set up a payment plan to pay off the debt over time. Otherwise, you may have your wages garnished or have a lien placed on your property.