How Do I Reduce My Minimum Payment to Creditors?

If your financial situation is spinning out of control and you are no longer able to make your full monthly payments on time, something needs to happen. Or, perhaps you are already in a debt management program and aren’t able to keep up with your already lowered monthly payments. There are two things that can be done.

First, you can try talking to your creditors; explain your situation and request a lower monthly payment. If that doesn’t work you should consult a bankruptcy attorney. Although it may not seem like the ideal situation, bankruptcy can help you lock in a payment you can afford without having to request permission from your creditors.

Plus, bankruptcy isn’t a horrific nightmare as its reputation suggests. A chapter 13 bankruptcy is very similar to a debt consolidation program, except your monthly payments are determined based on what you can afford, not the size of your debts.

Request a Lower Monthly Payment From Creditors

The debt you owe is a legal agreement between you and your creditor. If you pay less than you owe, without creditor agreement, your account will go into default. This means your creditor can take action against you to collect on your debt (e.g. lawsuits, repossessions, wage garnishments, bank account levies, etc.).

As a first step you can request a lower monthly payment from your creditors if you are unable to keep up with the full monthly payments due. Remember this is a request; creditors do not have to agree or comply with any plan you are proposing. For this reason there are certain practices you should follow in order to have your request considered:

• Remind the creditor you are a customer and you value doing business with them
• Explain your situation and circumstances that are preventing you from making your monthly payments
• Focus on what you can do; leave out the word 'can’t' if possible
• Propose a plan that allows you to make your monthly payments; include and highlight creditor benefits
• Do not offer to pay more than you can
• Let the creditor know you are willing to compromise, but be clear on your capabilities
• Get all agreements in writing, document all conversations and keep all documentation

All you can do is ask; creditor participation is completely voluntary. If they refuse to accept your plan you will have to seek an alternative method for reducing your minimum monthly payment.

File Bankruptcy to Reduce Your Minimum Monthly Payment

Contrary to popular belief, bankruptcy can help you out of financial trouble without ruining your life. In fact, a Chapter 13 bankruptcy is very similar to a debt management program but with more valuable benefits for you.

The most important, relative to lowering your monthly payments, is that your income and expenses are taken into account when calculating your monthly payment. Your monthly payment will be affordable and you will have money left after making your debt payment to buy groceries for dinner.

Secondly, you will not have to extend your payment timeline or raise your interest rate in order to reach an agreement with a creditor. Your repayment period is a fixed interval of three or five years and any unpaid debt at the end of that period is eliminated, tax-free.

Additional Chapter 13 benefits:

• Your creditors are legally required to comply if your repayment plan is approved in the Bankruptcy Court.
• You won’t have to deal with your creditors; you will make payments to your bankruptcy court trustee who will then disperse the funds to your creditors.
• Creditors cannot perform any collection activities against you during your repayment period OR after it ends. Your liability to pay your debt is eliminated when you file a Chapter 13 bankruptcy.

If you would like to find out more about the Chapter 13 bankruptcy process and benefits or you think it might be right for you, request a free, no-obligation bankruptcy consultation from our experienced bankruptcy attorneys.