Most creditors will require the debtor to set up automatic payments that will either charge the debtor’s credit card or bank account for each installment period. Use a Credit Card/ACH Authorization Form to obtain the debtor’s payment details.
There is often no security pledged with the incentive to pay by the debtor is either interest-free payments or a discounted total balance.Īfter the signature of the creditor and debtor, the agreement becomes legally valid.įor payment plans consisting of more than $10,000, it’s recommended for both parties to attach a Notary Acknowledgment to the agreement and sign in the presence of a Notary Public. When agreeing to terms the creditor may request the debtor’s last two (2) years of IRS income returns and a copy of their last paycheck.Īfter agreeing to the balance owed, the terms of the payment plan should be written in a simple agreement. If there is interest accumulating on the balance, it’s advised the debtor pay 20% of their income. Outstanding Balance – Used to consolidate or make an agreement with a creditor where funds are owed.Examples: Motor Vehicle, Cell Phone, etc.Goods or Services – A payment plan created for a customer seeking to purchase goods or services with payments made over a short term (6-18 months).There are two (2) types of payment plans: The debtor and creditor must come to terms with a payment arrangement that benefits both parties. For outstanding balances, a payment plan is often the “last chance” for the debtor to clear a debt. Setting up a payment plan requires the consent of a creditor and debtor and to define the terms and conditions in an agreement. If there is a traditional interest rate, it cannot be more than the State Usury Rate. This is a common incentive for the debtor to not default on their payment schedule. Under most payment plans, there is no or little interest as long as payments are made on time. This is often when an amount that is unaffordable to an individual is owed, and the creditor allows payment over the course of months or years. A payment plan is a way for someone to pay for something over a specified length of time.
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