Shlog Section-f

My husband and I were talking about some friends of ours this afternoon.  They have been sharing with us that they are having financial difficulties (due to the husband’s job loss) and are trying to pay their bills without filing for bankruptcy.  They have been unable to pay a couple of bills the last 3-4 months, so they called one of the financial institutions to tell them what was going on and let them know they had every intention of paying their bills when they were able.  They asked if there were any suggestions about how to deal with it and they were told that the company would accept 50% of the amount owed if they could pay it off in three monthly installments.  One now, one at the end of Oct and the final one at the end of Nov.  Basically, they owed $3200 and were asked to pay three $535 installments.  With the help of his parents, they found this to be a good solution and then they can pay his parents back when their situation improves.  At first, I thought it was a great way to help them get out of debt without filing bankruptcy.  My husband thinks that it’s wrong for them to accept the settlement, because they owed $3200, they should pay $3200.  (He did not share this with them.) I find myself wondering if he’s right...but the bank offered the settlement, so then I wonder if I’m right...I go back and forth.  What are your thoughts? 

If whoever they owed the money to is cool with it, then I guess it’s ok.  I mean, I don’t think it’s our place to decide if that’s right or wrong.

UNLESS, it affects everyone and everyone else has to pick up the slack.  Then it’s not fair.

I would say accept the settlement offer, but with the understanding (even if it’s only between the two spouses) that they will repay the entire amount owed when and as they are able.

Beth

I’m not trying to decide if they were right or wrong, that’s their business.  It was the discussion that followed between Ken and me that made me wonder what others thought.

Cristy,

I just re-read my original post and I sort of sounded like a jerk.  I hope you will forgive me!  I think Beth’s idea is a good one.

I think Beth’s idea is good also, and I didn’t think you sounded like a jerk at all!!  I thought maybe I hadn’t made myself clear in the original post, so I was clarifying.  No harm done. 

I would bet that a good portion of the money owed the bank is interest.  The bank is deciding to give up profit in order to get a definite return of the principle.  If your friends declare bankruptcy, the bank may get nothing or only pennies on the dollar of what was loaned.  No, it is not the agreement made at the time the money was taken; however, it is the banks prerogative to allow a change that helps the borrower when it will also help the lender.

And, usually, these end up being one-time deals.  The banks watch to make sure people don’t abuse their willingness to reduce the debt on occasion.

Yes, it was shared that they had paid $125/mo for the past two years, so they had already paid the bank approx. $3000.  Then they were unable to pay, so when the bank offered the settlement, they took advantage of it figuring the bank would still have made a profit over and above the principal originally borrowed.  (Even though it was not the original agreement.)