Legal Question in Credit and Debt Law in Illinois

Re: Do I have to pay the lump

Basically under contract law principles you are bound by the credit holder agreement which usually provides for steep interest fees, penalties and so on. Once your account is past due for a certain amount of months, it is sent to a collections office. There are in-house collections departments and independent collection companies. Various consumer protection laws exist for consumers such as the Fair Debt Collection Practices Act (FDCPA) which prohibits harassment by collection agencies and requires the creditor to provide a verification of the debt and necessary disclosures. There is also the Truth in Lending Act which prohibits deceptive or ambiguous clauses in agreements. There is no quick answer to your question. If the collection agency has followed all of the correct procedures they have the right to insist on a lump sum payment right away. If you don't pay, the creditor can either charge-off the debt as bad debt or file a lawsuit against you. Generally if a lawsuit is filed the creditor shall accept installment payments. Be aware that charge-offs and judgments can affect your credit adversely. Your checking account cannot be frozen untila judment is obtained against you. False threats by collection agencies are a violation of the FDCPA. So you should request a verification of the debt in accordance with the FDCPA and then engage in further negotiations with the collection agency. Depending on your financial circumstances you may be able to negotiate a better lump sum deal. For example, when my clients are considering filing bankruptcy, I have obtained settlements for 50% of the lump sum or lower.