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CalAttorney2, Lawyer
Category: Consumer Protection Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney representing individuals and businesses.
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We're an Oregon "S" corp small business. We

Customer Question

We're an Oregon "S" corp small business. We had $14K in credit card debt to a national bank. Slow business sales made it impossible to meet the debt payment. We were told that if we paid $325, they would restructure the debt. Instead, they took our payment of $325 and turned us over for collection. We had a monthly ACH agreement with the collection agency, which we met, and believed was set for balance of the loan repayment. So far, we've made every payment, and we've paid about $6K back . At the end of 2015, they said they wanted to reschedule the debt and increase the payments. What are our options at this point?
Submitted: 1 year ago.
Category: Consumer Protection Law
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

I am sorry to learn of this matter.

You can try to negotiate a refinance with them - the creditor is likely to be more interested in getting paid than they are in trying to force you into insolvency, so if you are able to offer a viable payment plan (see my notes below on general debt negotiation strategies).

The creditor's ultimate remedy is to sue the corporation for "breach of contract" and enforce a judgment against the corp. using bank levies (where they periodically empty the corporation's bank accounts, they can also place liens against the corporation's property and assets (depending on the status of the property (other liens, value, etc.) the creditor may choose to levy on them via auction).

You will want to ensure that you are not personally liable for the card debt (you are not a "personal guarnator" for the debt). Many creditors require shareholders of small corporations to act as personal guarantors for their loans, so you will want to check this carefully to ensure that they are not going to take collection actions against you personally.

  • When trying to settle a debt, creditors generally prefer lump sums over payment plans. They are often willing to accept an amount less than the full debt (the trade off is that they get a quick payment and don't have to worry about ongoing collection costs or administration). If you do not have the ability to offer a lump sum for something the creditor will accept (some will accept a small portion, while others want close to the full amount), you can try a payment plan, these are less satisfactory to the creditor (especially if they have a lien on your property already), but if you are willing to offer something with a reasonable chance to get the creditor a large amount of their debt back, you are likely to get them to accept it.

    Whenever working with a creditor, make sure that you keep your communications in writing (if you speak to someone by phone, promptly send a confirmation letter to summarize your conversation), as this will help to ensure that there is no confusion later on, and you will be able to enforce your settlement against any future collection efforts.