Accord and satisfaction is a compromise between a debtor and a creditor to release the debtor from the original debt obligation in exchange for a new payment. The new payment is usually less than the full amount owed and does not satisfy the original debt but is accepted instead of the original agreement. Rather than being treated as a separate contract, the new agreement is often viewed as 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 the original debt. However, the new agreement must have consideration to be a binding contract. This is usually satisfied by the execution of the new agreement, since the creditor and debtor are both receiving something of value, the freedom from the original debt and the present payment.

Since accord and satisfaction is an affirmative defense, the burden is on the debtor to establish that the obligation was discharged the the event that a creditor does attempt to enforce the original debt.

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, including:

  • Complaint on quality of an item or a service provided by the creditor that leads to a settlement for a smaller payment;
  • Upfront lump sum payment instead of several smaller installment payments; and
  • Payment from a high risk debtor for less instead of risking having the debtor completely default on the debt.

Do I Need a Lawyer?

Debt payment and collection can be a very confusing issue. A 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.