Do Debt Collectors Have to Accept any Payment?

Question: We had some months without income and were struggling to make payments. We sent a check for less than the minimum payment but the company refused it and sent it back. Are we still obligated to pay them after their rejection of payment? – Bonnie N. in Florida

Mandi Woodruff, executive editor at MagnifyMoney, responds…

Dear Bonnie,

To answer your question in short: Yes, you are still obligated to pay a lender even after their rejection of payment, with some stipulations. However, that doesn’t mean you don’t have options that can help you better manage debt while you recover from a loss of income. Depending on the type of debt you’re referring to, you may be able to deal directly with the creditor to develop a payment plan, reduce debts or work with government entities to help make payments.

Because we don’t know the specific kind of debt you’re dealing with, here are a few examples of common types of debts, your obligations and what you can do to get back on track with more manageable payments.

Mortgage

According to the Consumer Financial Protection Bureau, mortgage lenders are not required to accept payments that are below a monthly minimum payment, and so they are allowed to reject your payment. You are still obligated at that point to continue paying your mortgage. Call your mortgage lender to discuss whether you can agree to a new repayment plan or loan modification.

Once your household has recovered from a temporary loss of income, you may want to consider refinancing your mortgage, especially if you purchased your home when interest rates were high. The process comes with pros and cons, but in the immediate term, refinancing can help lower your monthly mortgage payments. You may also be able to obtain a cash-out refinance if you want to use funds from a lower interest-rate mortgage to pay off high-interest debts like credit card debt. For now, however, call your lender to talk through your options.

Credit cards

If your credit card company has refused payment, contact them as soon as possible to explain your situation, your personal budget, changes to employment and other pertinent information. You can then make an offer of payment in writing, and provide as many details as possible, especially if you’ve reached a lower payment agreement with other creditors. National Debtline offers sample letters for you to contact your credit card company to work out a payment plan.

Utilities

Contact your utilities companies as soon as possible if you can’t make full payments. Many companies offer programs to average out your monthly bills to help lower payment requirements, which may be helpful until you’re able to recover from a temporary loss of income. This option may be especially useful during particularly hot months in Florida when your utility costs rise along with outside temperatures. There are also government programs available to help you avoid getting your utilities shut off for those with low or no income.

Medical debt

Start by calling the hospital billing department to see if you can get your medical debt reduced or forgiven altogether. Explain your circumstances to the hospital or billing company — disclosing your loss of income may help you and the company develop a more manageable payment plan or allow you to qualify for other kinds of help.

It’s great that you’re still trying your best to make payments even though you’ve experienced such a financial blow. Depending on the type of debt you have, you may want to look into debt relief programs to help you tackle your debt going forward. Hopefully, you’ll soon be back on your feet and able to make minimum payments each month as you and your household recover.