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- Not all debt situations need an Income and Expenditure Statement and the involvement of debt counsellors. A few well-chosen words can usually give you the opportunity to resolve the debt problem within your financial capabilities.
- The following letters do not need to be strictly adhered to and you can change whatever suits your particular scenario. But a few guidelines:
- Deal quickly with all correspondence: settlement figures change, as do arrears, and what your creditor allowed last month in their letter might not be on offer if you take a month to reply.
- Sending a payment with your letter shows commitment, ability to pay, and is very difficult for the creditor to refuse your offer. That said, many lenders train staff to almost ignore your plans and requests in an attempt to intimidate you into agreeing what they want. IF YOU DON’T HAVE IT – DON’T TELL THEM THEY CAN HAVE IT. You agreeing to their demands looks good on their daily work sheet, but you will be the one who did not maintain the agreement, and you will probably end up in court twice as fast.
- The lenders staff have a responsibility to recover as much as possible, in as short a time frame as possible: sooner or latter they spot the genuine distressed debtor.
- Request Outstanding Balance
Use to compile an accurate figure of all outstanding balances, the settlement figure (the settlement figure would usually be the amount that the company would take you to court for). And a copy of the agreement (needed by anyone who counsels you to ensure you do owe the money and within a fair contract).
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Dear Sirs
Ref. Account Number: 12345
(Your name and address) Mr J Smith, 1 Avenue Road, ANYTOWN AA1 11A
Can you please provide me with:
the current outstanding balance,
the current amount overdue,
and the current settlement figure.
Can you please also supply a copy of the agreement: payment terms and conditions included.
Finally, please provide the name and address for future correspondence.
Yours ...
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- Offer of Continued Payment and Part of Arrears
Use to make an offer of payment to an individual creditor who you have fallen into arrears with, but you feel you can now currently maintain and reduce arrears. You may want to send letter number 1 (above) first.
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Dear Sirs
Ref. Account Number: 12345
(Your name and address) Mr J Smith, 1 Avenue Road, ANYTOWN AA1 11A
Due to past circumstances I have been unable to maintain my payments to you.
I now believe that I can continue the correct (monthly/weekly) payment of (£50) and an additional payment of (£10) a total of (£60) the first payment is enclosed. (or the first payment will be sent when I receive your acceptance).
Can you please confirm your acceptance of my offer.
Yours ...
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- Offer of Reduced Payment for a Period
Send to an individual creditor to either reduce a current payment due to a change in circumstances or to start payment of a debt you have not paid for some time. This type of letter needs you to be pro-active in contacting the creditor to show your commitment and ability. Again, you might want to send letter number 1 (above) before sending this letter.
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Dear Sirs
Ref. Account Number: 12345
(Your name and address) Mr J Smith, 1 Avenue Road, ANYTOWN AA1 11A
Due to current unfortunate circumstances I am unable to make the agreed payments (or reduce the outstanding arrears).
I see the current situation lasting for another (6) months in which I will not be able meet the full payment.
I can make a (monthly/weekly) payment of (£50) for the next (6) months and I will contact you nearer the end of this period.
Yours ...
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Optional Last Paragraph
Below is an optional paragraph that you could add to any of the above letters. The add-on tells the creditor that you have strength, resolve and intelligence (sorry, but true). The reason you may not want to add it is because of the ‘strength’ bit: you may want to show humbleness – your choice.
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The offer of payment I have made to you is the most fair and sustainable payment I can offer. It is my intention to discharge this debt at the earliest possible opportunity, and therefore, I can assure you of my integrity and commitment in dealing with you and the debt.
Yours ...
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Offer to Settle Full Outstanding Balance
If you have a number of debts and you either apply for a consolidation loan or you have been given some money, but you do not have enough to settle all of your debts, you can try to obtain favourable settlement figures from all of your creditors.
If you have £10,000 of debts and you can get a loan for £5,000 (which will also reduce your monthly payments from, say, £600 to £300 per month) you need to gain your creditors approval (do not get the loan until you have the vast majority of creditors behind you). You should send letter number 1 (above) before sending this letter. The settlement figure that is returned to you is your starting point: negotiate down from that figure, say, 50% if you have genuine debt problems and the settlement is being paid by a consolidation loan.
A creditor, for proof of other creditors settlement figures, may ask you to forward copies of each creditors settlement amount, which would be acceptable.
You need to be strong in dealing with creditors that you are trying to get to reduce settlement figures. Sometimes it’s the smallest creditor that will not shift: remind them that if they did sue you the county court judge might not be best pleased with a creditor that ignored a genuine debtors plea for a fair resolution of a debt issue.
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Dear Sirs
Ref. Account Number: 12345
(Your name and address) Mr J Smith, 1 Avenue Road, ANYTOWN AA1 11A
Your letter of the (22 Feb 2000) stated that the current settlement figure to discharge the account in full is (£2,000.00).
The reason I requested the settlement figure from you, and my other creditors, is to take out a consolidation loan (or accept the help of my family) to settle all other debts.
The total amount owed to creditors is (£10,000) of which I can pay every creditor (50%) of their settlement figure. You will receive (£1,000.00) approximately four weeks from the date of this letter. The amount needed to settle all debts, (£5,000.00), is the absolute limit of my capability with no other options available other than individual county court action, and possibly some form of bankruptcy.
Please consider my sincere offer and accept my apologies for this involved process. Please send me a letter confirming your acceptance of my offer. If no confirmation has been received within 14 days of the date of this letter I will assume your favourable acceptance of my offer and make payment to you as described above.
Yours ...
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- Payment of Reduced Settlement
When you receive the confirmation of acceptance of your reduced offer you need to send a letter with your payment.
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Dear Sirs
Ref. Account Number: 12345
(Your name and address) Mr J Smith, 1 Avenue Road, ANYTOWN AA1 11A
Thank you for your letter of (22 Feb 2000), in which you agreed to the reduced settlement figure of (£1,000.00) in full and final settlement of account number (12345).
My cheque for £1,000.00 is enclosed.
(if you did not receive confirmation of your offer use the following paragraph in place of the one above)
Further to my letter of (22 Feb 2000) that said,
'The total amount owed to creditors is (£10,000) of which I can pay every creditor (50%) of their settlement figure. You will receive (£1,000.00) approximately four weeks from the date of this letter. The amount needed to settle all debts, (£5,000.00), is the absolute limit of my capability with no other options available other than individual county court action, and possibly some form of bankruptcy.
Please consider my sincere offer and accept my apologies for this involved process. Please send me a letter confirming your acceptance of my offer. If no confirmation has been received within 14 days of the date of this letter I will assume your favourable acceptance of my offer and make payment to you as described above.'
As you have not responded to my letter, I assume your acceptance of my offer and I enclose my cheque for £1,000.00 in full and final settlement of account number (12345).
Yours ...
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Many thanks to Colin Duguid of Debt 24.com who is taking the time to provide this information as a service to homeworkers.
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