How to deal with creditors who are pushing you to make repayments you can’t afford.
First, don’t lose sleep over unmanageable levels of debt.
If you’ve reached the point where you realise that your debt obligations have spiraled out of control and that it’s time to take responsible action, what information do you need to prepare when applying to creditors with a proposal of affordable monthly repayments?
There are three primary components to this and they are;
1) A breakdown of your income and current outgoings.
2) Details of your debts, who you owe money to, and any current or pending County Court Judgements.
3) The letters you need to send to your creditors.
This is not rocket science. Once you understand that you have to help yourself, then the path forward is moderately straightforward. Working with these instructions can help you.
- A breakdown of your current income and outgoings.
As you are now aware that you can’t manage the cost of paying your creditors at their required level, what would you be able to pay every month?
To get to a realistic figure is a simple enough exercise. List your salary or drawings and add in any state benefits. Then, afterward list all of your outgoings.
Don’t misrepresent the truth and be reasonable with your calculations.
However, you can include items such as TV subscriptions, hairdressing, and even holidays. But if you go out each night and burn through £100 a week at the pub, your proposal is likely to be frowned upon by your creditors!
Deducting your (realistic and reasonable) outgoings from your pay you should (ideally) be left with a positive-sum that you will offer to divide up and pay to your lenders each month.
- Information about the level of your debt and who your creditors are.
Firstly, and above all, you need to exclude your mortgage or rent, student loans, court fines or Child Support Agency obligations. If you are experiencing difficulty with any of these, contact them immediately, and explain your circumstances.
If you hold credit cards, personal (unsecured) loans, payday loans, overdrafts, and other debts you will need to show the name of your lender, your credit agreement number, and the amount of outstanding debt. Make it clear and easy to follow by listing all items in a table.
- Covering letter to your creditors.
You should send each of your creditors a complete and realistic breakdown of your financial circumstances together with a list of all of your other creditors.
Your covering letter should clarify that you do want to make a sensible proposal of repayment every month. Recommend an amount in accordance with your outgoings and the different financial commitments you have. The greater the outstanding debt per creditor will mean the greater the amount per month that you should offer them. Ideally, it will be on a pro-rata basis.
Once you have presented an affordable repayment plan to your lenders, it may take around fourteen days before you hear a response to your proposals. Some may take longer.
If the creditors agree on your repayment proposals ensure you stick to it. If they don’t agree or want a greater sum per month consider asking a professional debt management company to act on your behalf.
They can shield you from unwanted letters and phone calls and will act in accordance with your limited financial resources and often apply a no-nonsense approach with your creditors. They may charge you a very small amount per month based on the number of creditors and how much you can afford.