What If a Creditor Won't Accept Your Ability to Pay?

If you've fallen behind on your payments to creditors, you simply may not have the ability to repay due to situations such as a job loss. In some cases, your creditor may agree to an alternate payment plan, or you may be able to obtain assistance from a credit professional. A determined creditor could also decide to seek a remedy through legal action.

Negotiate a Smaller Amount

If your creditor does not accept your claim that you cannot pay the full amount you owe, it may be willing to accept a smaller amount instead, with the idea that receiving something is better than nothing. You can offer to make a reduced monthly payment, pay only the interest on the debt or ask to defer payments until your financial situation improves. If you purchased an item on credit, you can offer to return it if it appears your financial issues will not be resolved in the near future.

Provide Documentation

You may have a better chance of convincing a creditor of your inability to pay if you can provide documentation. Send the creditor a simple financial statement outlining your current liabilities, assets and present income. If your financial situation truly is dire, the creditor will be able to see that you do not have the means to meet your obligation, and you may have a better chance of reaching an agreement.

Seeking Help

If you're not having much success in working with your creditors on your own, you can see the assistance of a nonprofit credit counseling service. A credit counselor can help you examine your financial situation to see if you can come up with additional funds to satisfy your creditors. In some cases, the counselor may be able to negotiate with your creditors on your behalf to develop a payment plan that works for you and the creditor.

Consequences

If the creditor absolutely refuses to budge, it can take a number of actions based on the language of your contract and the laws of your state. If you default on a collateralized loan such as a car note, the lender may be able to repossess the property. It could also pursue legal action such as a lawsuit, and your wages could be garnished as a result. A court could also require you to repay the outstanding balance at once and seize and sell your assets if you cannot afford to pay.