united-states debt is-x-legal
Is a debt canceled if the creditor refuses a settlement offer?
<p>I've been told by several people on several occasions -- in several jurisdictions within the US -- that if you owe someone money, you can offer some stupidly low amount of cash (most versions include numbers from $1 to 25%) to settle the debt. If the creditor refuses that offer (or in some versions of the claim, if they don't word their refusal <em>just so</em> to make it a counteroffer), then the debt goes away.</p>

<p>Is there any validity to these claims?</p>

<blockquote>
  <p>Is there any validity to these claims?</p>
</blockquote>

<p>No, except maybe in bankruptcy proceedings that involve additional circumstances/factors.</p>

<p>A loan is a contract. What you describe is simply a debtor's attempt to replace the contract he incurred with a creditor. As such, the creditor is entitled to decline the settlement offer, thereby leaving the initial contract (in this case, the original conditions of the loan) in force.</p>

<p>Generally speaking, declining a new proposal <strong>does not</strong> invalidate the contract that would have been replaced if the offeree were to accept such proposal.</p>

<h2>No</h2>

<p>If you owe someone money then you must pay them the full amount, subject to a binding <strong>agreement</strong> that you can pay less. </p>

<p>"I know I owe you $100, how about I pay $5?", "No." - is not an agreement, let alone a binding one. In fact, "I know I owe you $100, how about I pay $5?", "Give me the $5.", money changes hands, "Now, give me the remaining $95." is a demand that would be upheld by the court - part payment of a debt is <strong>not</strong> satisfaction of that debt.</p>

<p>Even if the creditor agrees to take less, there must be a something of value offered by the debtor. Agreeing to pay it now (or by next Thursday etc.) rather than forcing the creditor to take the debtor to court <em>is</em> something of value - in such circumstances if the creditor agrees then there is a binding contract that if the debtor does what they promised the creditor will accept a lesser amount.</p>

<p>A possible source of confusion is that if a creditor is offered <em>full</em> satisfaction of the debt in legal tender (and the contract does not restrict this) and they refuse then the debt is discharged.</p>

<p>Legally, absolutely not. The law aims to be inherently <em>reasonable</em>.  And there are two parties involved, both of whom have rights.  Such an arrangement would be unreasonable, even unconscionable from the other party's perspective. </p>

<p>As a practical matter, lenders know they can't get blood from a stone.  Collecting money has very significant costs to it, and not lightly does a lender spend those costs. They pursue people they believe are actually collectable.  It's very comon for lenders to simply allow debts to lapse beyond the statute of limitations, what else can they do? </p>

<p>Financial education is nearly a prerequisite to wealth. Perhaps your friends who believe such poppycock have had very good luck dodging creditors; they may credit their own wit, but more likely the creditors simply know they are broke. <em>Correllation is not causation</em>.</p>

<p>No. Argentina defaulted on their debts in the 1990's. No one would lend to them. So they decided to issues bonds based on US laws and rules. People bought them up. Then they defaulted again in the 2000's. A few hedge funds held those bonds and refused to settle for an insane write off. They took Argentina to court in New York, where the bonds were originated, and won. They have been trying to collect on their debt since. They were able to confiscate an Argentina Navy ship docked in Ghana. Argentina cried &quot;Not fair! You refused to settle!&quot; Eventually, Argentina had to settle for a much higher amount and the hedge funds made a profit by waiting, having faith in the rule of law*, and not panicking like everyone else.</p>
<p><a href="https://www.bloomberg.com/news/articles/2015-10-22/hedge-fund-billionaire-s-epic-argentina-clash-was-it-worth-it-" rel="noreferrer">https://www.bloomberg.com/news/articles/2015-10-22/hedge-fund-billionaire-s-epic-argentina-clash-was-it-worth-it-</a></p>
<p><a href="https://www.nytimes.com/2016/03/01/business/dealbook/argentina-reaches-deal-with-hedge-funds-over-debt.html" rel="noreferrer">https://www.nytimes.com/2016/03/01/business/dealbook/argentina-reaches-deal-with-hedge-funds-over-debt.html</a></p>
<blockquote>
<p>Argentina has agreed to pay $4.65 billion to four hedge funds in a deal that could put an end to more than a decade of legal attacks that had cut the country off from global financial markets.</p>
<p>These holdouts, so named for their refusal to participate in Argentina’s two restructurings after the country defaulted on $100 billion of debt in 2001, sought billions in bond repayments and eventually succeeded in preventing Argentina from paying any of its creditors.</p>
<p>And they went to great lengths to compel Argentina to pay — at one point persuading authorities in Ghana to seize an Argentine navy ship as collateral, with a crew of about 300 on board. They also moved to impound other government assets, including a satellite.</p>
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<p><a href="https://www.washingtonpost.com/news/business/wp/2016/03/29/how-one-hedge-fund-made-2-billion-from-argentinas-economic-collapse/?noredirect=on&amp;utm_term=.b8f100b38999" rel="noreferrer">https://www.washingtonpost.com/news/business/wp/2016/03/29/how-one-hedge-fund-made-2-billion-from-argentinas-economic-collapse/?noredirect=on&amp;utm_term=.b8f100b38999</a></p>
<blockquote>
<p>In order to collect the decade-old debt, Singer’s fund tried to claim money deposited by the country’s central bank in the U.S. and Europe. And it sought to seize two satellite launch contracts between Argentina and SpaceX.</p>
<p>Elliott Capital persuaded a Ghanaian court to seize the vessel so it could collect on its debt. Argentinian officials would lash out at Elliott as “unscrupulous financiers” and after more than two months the ship was released.</p>
<p>The hedge fund fight dates back to 2001 when Argentina defaulted on $80 billion of debt. Most of the country’s creditors, 93 percent, agreed to walk away with just 30 percent of what they were owed. But the remainder, including Elliott, other hedge funds and some small independent creditors, refused the deal.</p>
<p>“The only reason they [Argentina] settled, I think, is because they need access to the markets again and would not have much of a chance without settling. They are among the most frequent defaulters in the markets and have been for years, it seems only a matter of time before they will do it again.”</p>
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