By Todd Ossenfort
Published: May 25, 2009

Dear Credit Guy, I received two court judgments against me. These judgments are about 5 years old. I could get no information from my creditor. I received a phone number for their collection agency. The collection agency refused to allow me to make payments in order to pay off the outstanding accounts. The two outstanding accounts amount to about $4,000.00. I offered $200 per month in payments. I don't understand their all-or-nothing decision. I am on Social Security, and there is no way they are going to get a better deal than I offered. If I could contact a decision maker with my creditor and explain my case, would I get a positive response on this matter? -- Fred

Dear Fred, Congratulations on trying to do the right thing and pay what you owe. It is unfortunate that the collection agency is unwilling to work with you to accept monthly payments. This is an exception rather than the norm. If your only income is your Social Security, it sounds as if you are correct in believing they will not get a better deal than what you have offered to pay monthly.

The fact that the judgments are 5 years old tells me that it is very likely the collection agency already knows that you have no assets to make good on the $4,000 that you owe. If you did, the collection agency would have used the judgment(s) to secure a wage garnishment or to place a lien on your personal property.

If you do own a home or other property I'd check with your city and county tax assessor's office or other county records departments to learn whether there is a lien against your property. State and local laws vary across the country, so a lien could have been placed without prior notification to you of the action. Should a lien have been placed on your property, it will be more difficult to sell or refinance the property without satisfying the lien first. The lienholder cannot, however, force a sale of your property.

The reason the collection agency wants you to pay what is owed upfront and not in monthly payments is that they have very little invested in the debt -- typically pennies on the dollar -- and do not want the hassle of monthly collection. They would much rather settle for less than the full amount and get it all at once, than receive a small amount each month.

You could attempt to contact your original creditor, but once the amount owed has been sent to collections, the creditor does not keep the records and is not usually interested in collecting the debt. In most cases, the debt has been sold to an outside collector and the original creditor has charged off the balance on its ledgers and taken the loss, thereby removing your account and the debt from its radar screen.

My advice is to send a written response to the collector by return receipt mail that you are willing to settle the debt by paying $200 per month until the debt is paid and if that is not acceptable, you no longer wish to be contacted regarding the debt. The past due accounts and judgments will come off your credit report after seven years, and you can sleep well at night knowing you did your best to pay what you owe.

Take care of your credit!

Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.

The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.