University of Illinois Extension

Talking with Creditors

Contacting Your Creditors

Once you know your income and expenses, contact each creditor, explain your family’s situation and ask their assistance in working out a solution.

Be prepared to explain the following:

  • The reason you cannot pay.
  • Your current income and prospects for future income.
  • Other obligations (bills) you have.
  • Your plans to bring this debt up-to-date and keep it current, including the amount you will be able to pay each month.

If possible, visit local creditors in person. Visit the loan officer at your bank or credit union, the credit manager of local stores, and the budget counselor at the utility company. Don’t forget creditors like your dentist, physician, clinic and hospital.

Contact out-of-town creditors by phone or letter. If you phone, write down the name and title of the person you talked to. Follow the conversation with a letter summarizing the agreement between you and the creditor. Keep copies of your correspondence as well as any reply.

Use the sample letter as a guide when writing to creditors. You may also use it as an outline of what to say when talking to a creditor.

As you negotiate with each of your creditors, don’t agree to any plan simply to get off the hook. Be sure you will be able to follow through on the agreement. Establish a payment rate that is acceptable to both you and the creditor.

Here is a list of some alternatives to consider when negotiating with your creditors:

  • Reduce the monthly payment.
  • Refinance the loan.
  • Defer a payment for a short time if you expect your income will increase soon.
  • Reduce or drop late charges.
  • Pay only interest on the loan until you can resume making monthly payments.
  • Voluntarily surrender or give back an item purchased on credit.
  • Sell the item and use the cash to satisfy, or partially satisfy, the debt (you are still responsible for any remaining balance).

Not all creditors will be willing to accept alternatives. However, they’ll be more likely to work with your family if you contact them before they contact you. They all want to be repaid and would rather get some money on a regular basis than have to begin expensive collection procedures.

Tell your creditors about any changes that may affect your payment agreement. If you fail to follow the plan that you and your creditor agreed upon, they will be less willing to work with you. You will also hurt your chances of getting future credit.

If you owe a large amount of money, and if your creditors won’t accept reduced payments, you may have to consider more extreme alternatives such as filing bankruptcy.

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