Can A Creditor Add A Penalty Clause?

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Can A Creditor Add A Penalty Clause?

Sometimes a creditor will refuse to believe the debtors promises of payment. This often happens if the debtor has been unable to keep up with a previous payment agreement. In that case, creditors might be persuaded to accept a new repayment plan if the debtor offers to include a penalty clause in the agreement. Such a provision states that if the debtor defaults in making any of the agreedupon payments, they owe the creditor an amount of money in addition to the original debt. The amount of such a penalty should be sizable (probably no less than $100.00), to serve as a real incentive for the debtor to keep current on their payments. Offering to include such a penalty clause demonstrates their honest intent to pay.

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