What Is Accord and Satisfaction?
Accord and Satisfaction is a compromise between a debtor and a creditor for a payment to purchase the release by the debtor from the debt obligation. The payment is usually less than the full amount owed and does not satisfy the original debt but is accepted instead of the original agreement. The new agreement is like a modification of the original contract. Can the Creditor Enforce the Original Debt?If a new agreement is made to purchase a release, it discharges the original obligation. This means that the debtor no longer owes that money. However, the new agreement must have consideration to be a binding contract. This is usually satisfied since the creditor and debtor are both recieving something of value, the freedom from the debt and present payment.
Since accord and satisfaction is an affirmative defense, if a creditor does attempt to enforce the original debt the burden is on the debtor to establish that the obligation was discharged. Why Would a Creditor Settle for Less Than the Original Debt?There are several reasons that a creditor might agree to the purchase of the debt for less: - Complaint on quality of work that leads to a settlement for a smaller payment;
- Upfront payment instead of several smaller payments;
- Payment from a high risk debtor for less instead of risking default.
Do I Need a Lawyer?
Debt payment and collection can be a very confusing issue. An experienced attorney can advise you of your rights and assist in creating an agreement for the payment of a debt. A lawyer can also represent you in court. |
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