Can a financial institution threaten court proceedings if a good-faith effort has been made to pay back some of the money?

UPDATED: Jan 26, 2011

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Can a financial institution threaten court proceedings if a good-faith effort has been made to pay back some of the money?

I was laid off from my job last June, have had a hard time finding another job, and am now collecting unemployment. My credit union, through its lawyer, sent me a letter about 4 months agostating that I needed to start paying back some of the delinquency on my VISA credit card. I talked to the credit union’s VISA department head, put a good faith payment of $100 on my VISA account, and told him that I would try to do more when I could. But I just received another letter from the lawyer threatening me with court proceedings if I did not pay the delinquent amount in the next 20 days. Options?

Asked on January 26, 2011 under Bankruptcy Law, Pennsylvania


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

First, there's a common misunderstanding: people think that if they make partial payments or schedule payments over time in good faith, the lender or creditor has to accept that. Not so; a creditor may insist on payment in full when due, and does not have to accept good faith efforts that are not sufficient to repay all the debt. So the credit union may indeed sue you if you can't pay.

This doesn't meann that you can't work something out with them--just that they don't have to work with you. They can hold out for it all. If you can't come to an agreement, you really don't have much in the way of options: you can defend the suit if sued, but  if you really do owe the money, they'll win. At that point, you can pay; or if you don't pay, the credit union may try to collect, such as by garnishing wages or bank account, putting a lien on property, etc.; or you could declare bankruptcy, which is good option if the debt (your total debt) is realistically too much for you to dig your way out from under.

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