Review your offers to creditors

 January 2016

Fact sheet no. 28 EW Review your offers to creditors

Important:

use for non-priority debts only

This fact sheet is about non-priority debts, for example unsecured loans, overdrafts, catalogues, credit cards, and so on. If you want help with priority debts, which include things like mortgage, rent, secured loans, council tax and energy arrears, contact us for advice.

If you have made an arrangement with your creditors, after a while they may ask for it to be reviewed, or ask for an increased offer of payment. Use this fact sheet to:

  • understand what creditors can and cannot do;
  • help you negotiate with your creditors;
  • look at other options for dealing with your debts.

The sample letters mentioned in this fact sheet can be filled in on our website.

Your budget

Your creditors will probably want to see an up to date copy of your personal budget as part of the review. If a creditor sends you a blank budget to complete, you could use this but you don’t have to. You can continue to use your personal budget instead. Make sure you keep this up to date.

If you are not able to increase your payment offer, it is important that you tell your creditors this. You may find the Continue accepting my offer sample letter helpful. Hopefully your creditors will agree to accept your offer, and agree to freeze any interest and charges. If they do, it might be useful to make a note of when each creditor is due to review the arrangement. This way, you can be prepared.

What if my offers are refused?

If a creditor refuses your offer

Passing your account on to collections

Collections departments, debt collectors and solicitors have no more powers than the original creditor; all they can do is ask for payment. If you receive a letter from any of these, write to them and explain your situation. The Continue accepting my offer sample letter and the Reconsider my pro-rata offer sample letter may be useful.

 

Important:

visits to your home

A debt collector can only visit your home with your permission when the debt is deadlocked. The debt is deadlocked if you have offered to pay what you can afford, but the creditor is still unhappy with the offer.

  • Do not let them persuade you to pay more than you can afford.
  • Debt collectors normally collect debts by phoning or writing, but they are sometimes allowed to visit your home.
  • Debt collectors have no right to enter your property or remove your goods. You do not have to let them in.

If you have offered no payments

A creditor will often respond to an offer of no payment by asking again for a payment. Think about offering token payments, for example £1 per month, if this means interest will be frozen. You may find the Token payments or no offer of payment sample letter helpful. Ask for a payment book or payment slips to help you pay. However, do not be forced to pay something you cannot afford.

If you know that you are very unlikely to increase your income, perhaps because of a disability or a permanent change in your financial situation, you could consider asking your creditors to write off your debts. It is usually very difficult to get creditors to write off debts. However, if there is no real prospect of paying your debts off, you may be able to convince creditors that this is their best course of action. You may find the Write off the debt sample letter helpful.

If a creditor sends you a default notice

  • Creditors may send you a ‘default notice’ telling you how much you owe and that they may take further action if you don’t pay. 
  • Creditors usually send this before sending your account to their collections department, a debt collector or solicitor. Creditors have to send you a default notice for agreements regulated by the Consumer Credit Act 1974 before taking court action. If you get a default notice it does not mean you will definitely be taken to court.

If a creditor threatens court action

  • Taking court action should always be the last resort for a creditor.
  • Remember, it is not a criminal offence to be unable to pay your debts. You cannot go to prison for this reason. The court is there to settle disputes about money owed and how to repay it.
  • You will still make an offer based on your ability to pay. If you have no spare income, you should still make an offer of £1 per month.

It is very important to try and get your creditors to freeze interest. Otherwise, it will be more difficult for you to reduce what you owe. If you are offering small payments, the interest added by the creditor may be more than you are offering to pay and the debt will only get bigger. If a creditor refuses to freeze interest on one of your debts, contact us for advice.

Keep trying to persuade your creditors to freeze interest. The Freeze interest sample letter may help you. If some of your creditors have agreed to freeze interest, tell the others.

If your creditors are refusing to freeze interest, carry on making the payments you have offered anyway.

Things your creditors cannot do

Your creditors are allowed to contact you from time to time to ask you for payment, but they must not threaten or harass you. You may be able to complain to the Financial Ombudsman Service (FOS)  if they do. Contact us for advice.

In the following section we cover some of the threats creditors may make.

Imprisonment

You cannot be imprisoned because you are not able repay your non-priority debts.

Take goods from your home

Creditors cannot send someone to your home to remove goods just because you cannot afford to pay what they want.

Bailiffs or sheriff officers can only be used if you have a court judgment and you miss a payment that the court has ordered you to make. If a bailiff or sheriff officer is trying to collect a debt from you, contact us for advice.

Your home

For debts not secured on your home, your creditors cannot take repossession action just because you are unable to pay what they want.  There are ways to secure a debt on your home, but this is only possible once they get a court judgment. Even if this happens, this does not mean that you will automatically lose your home. 

See our fact sheet:

County court - charging orders.

This is only an option if you own your own home, rather than rent it.

Your wages

Creditors cannot have money taken out of your wages just because you cannot pay what they want. A creditor can only try to do this if you have a court judgment , and missed a payment you have been ordered to make. You may still be able to ask the court to let you pay by instalment instead.

Information:

what must you provide?

Creditors will sometimes demand information they do not need, for example, your employer’s address, or your bank account number. You do not have to give this sort of information to them if you do not want to. If they take court action, you will be asked to provide some information about your employer and bank account on the court forms.

Should I choose another option?

There may be better ways to deal with your debts. Your options depend on your circumstances at the moment, but you also need to think about how your circumstances could change.

  • Can you afford to repay your debts in a reasonable time, or do you expect your circumstances to improve so that you will be able to repay them?
  • Do you have assets that prevent you from choosing certain options?
  • Are there any other reasons why some options won’t be suitable?

Remember:

choose carefully

Some options may not work in the way you expect. Learn about all the available options before you make a decision. If you aren’t sure which options are available to you, or you need advice about your options, contact us for advice.

Useful contacts

Financial Ombudsman Service (FOS)
Phone: 0800 023 4567