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 just so to make it a counteroffer), then the debt goes away.

Is there any validity to these claims?

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    I do know that when a sufficient amount of creditors agrees to a settlement, other creditors can be forced to abide by it in some jurisdictions. The percentage of debt actually repaid can be quite low, though 1$ would seem to be a bit of a stretch
    – bytepusher
    Commented Dec 19, 2018 at 20:58
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    Just think about this for a moment. If this was true, why wouldn't everyone and their dog just take out millions in loans, offer to pay back $1 and get the debt automatically cleared? If something is too good to be true (and a loophole seems so very easy and simple to exploit), then it means it isn't. This way of thinking is like the "sovereign citizens" myth, some people believe that if they utter some magical words they can instantly get away with any crime and get cleared from any taxes.
    – vsz
    Commented Dec 20, 2018 at 7:08
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    @vsz: I agree it's absurd. But a bunch of otherwise unrelated people believe it, so i figured we might as well address it directly.
    – cHao
    Commented Dec 20, 2018 at 13:44
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    I asked a semi-related question on money.se asking about what the debt relief hucksters your friends have presumably heard extended sales pitches from. (I've only listened to 30s radio ads.) money.stackexchange.com/questions/60895/… Commented Dec 20, 2018 at 21:23
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    @Shufflepants: AFAIK, "I'll do what i've legally bound myself to do if you agree to this new condition" would fail for all the same reasons. The creditor is fully within their rights to take the money and still come after you for the rest, regardless of what legal shenanigans you try to pull. Particularly since you can't prove anyone ever read your get-out-of-debt-free note.
    – cHao
    Commented Dec 20, 2018 at 22:07

4 Answers 4


Is there any validity to these claims?

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

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.

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

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    However, this may run the opposite way: Acknowledging the debt (which certainly includes making settlement offers) may make it harder for the debtor to have it thrown out later. OP should probably consult an attorney if this is a "real" question.
    – Kevin
    Commented Dec 21, 2018 at 18:12


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

"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 not satisfaction of that debt.

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 is 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.

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

  • Is there a case where that last sentence would actually happen, though?
    – Wildcard
    Commented Dec 21, 2018 at 0:04
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    @Wildcard yes. when the Sydney Harbour Bridge had a toll paid in cash and the toll for motorcyclists was 20c it was not uncommon for riders to stop and start to count out 1c pieces while traffic banked up behind them and for the operator to just wave them through.
    – Dale M
    Commented Dec 21, 2018 at 0:16
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    @DaleM Technically, that's payment for a service rather than a debt, though. I'm not sure about Australia law, but, at least in the U.S., legal tender laws don't apply to payment for a good or service, only for payment of a debt. It's perfectly legal for a shop to refuse $100 bills, for example. A creditor, however, cannot.
    – reirab
    Commented Dec 24, 2018 at 6:32
  • @reirab But note that the creditor does not have to give change, so no one is going to force the issue on using a $100 bill to settle a 20 cent debt.
    – Mike Scott
    Commented Dec 24, 2018 at 20:42
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    @MikeScott I was just using that as an example. The point was just the, at least in the U.S., legal tender laws don't apply to purchases of goods or services, only to debt payments. Pennies could be refused as payment for goods and services as well, for example. Indeed, all cash can be refused as payment for goods and services, as is commonly the case for in-flight purchases on airlines, not to mention online shopping.
    – reirab
    Commented Dec 25, 2018 at 7:37

Legally, absolutely not. The law aims to be inherently reasonable. 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.

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?

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. Correllation is not causation.

  • "The law aims to be inherently reasonable." The law is not a living being with a will or intention. It's a set of words written by people. The reasonableness of it depends on who wrote it and who enforces it and potentially on the subjective evaluation of the person subject to it.
    – jpmc26
    Commented Dec 21, 2018 at 23:32
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    @jpmc26 I'm using that as a metaphor for the people who make law - judges and legislators, who are pretty closely watched.c. Commented Dec 21, 2018 at 23:53

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 "Not fair! You refused to settle!" 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.



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.

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.

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.


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.

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.

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.

“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.”

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    * Having faith in the rule of law is misguided. The Myth of the Rule of Law.
    – Chloe
    Commented Dec 20, 2018 at 19:25
  • Argentina had some additional problems. In particular, they had (possibly unintentionally) agreed not to pay any creditors in preference to any other creditors, which meant that A. payments to anyone who accepted the settlement were illegal unless they paid the holdouts and B. if they paid the holdouts, it could undo the settlement. This is arguably more an example of poor legal drafting than anything else.
    – Kevin
    Commented Dec 22, 2018 at 3:19

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