Some people believe if they make payment on bills placed for collection they will avoid legal debt collection. Further, the payor believes that their decision to pay amounts at their discretion prevents the creditor from moving forward in the collection process and going “legal.”
Does paying down a debt mean you get to enjoy “safe harbor” from a creditor’s collection efforts? The answer is mostly no. Creditors and their agents do not have to accept installment payments toward a debt.
The creditor (or their agent) and the debtor or the party paying on their behalf must agree to the terms of the payout and or settlement of the debt. A delinquent client can not merely begin sending installment payments to a creditor and claim to have a binding agreement with the creditor to resolve the debt. As with any agreement, there must be a “ meeting of the minds” in order for the agreement to be binding. The parties must agree on the terms, which ideally should be in writing.
For the payment plan to be binding, the elements of a contract must be met. Generally, they are offer, acceptance, intention, and consideration. For more information about how to create enforceable contracts, read our post about enforceable contracts.
What Is a Legally Binding Agreement?
However, there are times when a debtor will send an account payment accompanied by a letter detailing their intention to pay, the date, the rate at which they will pay, and further details. The letter specifically states that the creditor’s acceptance and tendering of the payment constitutes an offer and acceptance of the debtor’s proposal to pay and create a legally binding agreement. What about then?
Then, the debtor has an argument that there was a “meeting of the minds,” and that the creditor’s act of accepting the payment created an intent to accept the terms of the repayment by which they are bound.
It can be argued that even if the delinquent payor, the debtor, sends a payment with the details that would normally bind a creditor to accept the payment plan, the creditor can use restrictive enforcement “under protest and with full reservation of all rights” to claim no meeting of the minds and therefore, no legal obligation to accept the payment plan.
As an aside, it should be noted that there are times when a creditor will want to accept a payment plan. The decision should be made by the creditor, not the debtor looking to avoid legal debt collection in New York by merely establishing a willy nilly payment plan.
If you need help with a debt collection matter, contact Frank, Frank, Goldstein and Nager, for a free consultation. We have the experience that pays.