I had a question today about whether a creditor can demand payment of a debt in full (no payments) if you are current on your account. It’s a great question because it isn’t always clear what status your account is in – even if you think you are current.
Original creditor – account has never been past due
Let’s say you owe the original creditor (who you borrowed the money from) $6,000. You have never missed a payment, you have never been behind or over-the-limit. In this case, you are bound by the original contract and can make payments as they were stated in that contract. The creditor would have no reason to demand immediate payment in full.
Original creditor – account has been past due
If you miss a payment and become, usually, 30 days past due, a creditor may demand that you pay the entire debt as opposed to just catching up. This is because when you went past due, the terms of the contract may have been violated. This is one of the reasons why it is so important to read the fine print in contracts.
In addition, the creditor may not be satisfied if you simply catch the account up (pay the missed amount). You may certainly try making the payment and ask the creditor to accept it and reinstate the terms of the original agreement, but they do not HAVE to agree.
Not original creditor – collection agency
If a debt has been sent to a collection agency, chances are, they will demand payment in full. Collection agents are paid on commission and the more money they can collect, the more they will receive. In addition, the more recently you fell behind, the better their chances of collecting. They do not want to accept a long drawn out payment arrangement.
Different types of creditors
The two creditors most likely to demand payment in full if you fall behind are mortgage lenders and auto lenders. Again, this has to do with the stipulations in the mortgage agreement or contract. It is legal for them to make this demand.
Credit card companies are more likely to work with you on setting up an acceptable payment plan if you fall behind. But even they will eventually send a letter demanding payment in full if they are not receiving adequate payments.
If your creditor is demanding payment in full, the first thing to do is find out why. That means you will need to call them. It may be uncomfortable, but try to stay calm and ask for the reason they want full payment, the complete amount they are asking for and if there is anything you can do to bring the account into a good standing. Your chances of being successful are much greater when dealing with the original creditor rather than a collection agency.
If you need help developing a plan of action for talking to your creditor, or for repaying debts, call and talk to one of our certified credit counselors. They can help you determine what questions to ask your lender and what options you may have for repaying debt. You do not have to do it alone.