Dealing With Your Creditors

If your creditors are really on your back and you're refused either a consolidation loan or a cheaper credit card to handle your debts, then it's time to become even more pro-active.

Try to persuade the people to whom you owe money to give you a little leeway. Make a proposal to them based on your ability to pay, i.e. using the monthly surplus (or net disposable) income. The simplest way is to deduct, say, £50 to cover emergencies and then divide the surplus equally between all creditors.

Write to them all, enclosing a copy of your Statement of Affairs, and make an offer of payment. Point out that, while you intend to pay everybody in full eventually, you cannot give them what you don't have. Offer to review the position on a monthly/quarterly basis and tell them that, whenever possible, you'll increase the payments. Crucially, you ask if they will freeze any further interest charges in the meantime.

Don't expect the sort of response that says: "There, there, of course, Old Thing. Never mind -- everything's going to be fine."

There is going to be a great wailing and a gnashing of teeth (in some cases)!

The credit controllers working for these companies are not concerned with the rest of the people you owe money to -- they are only interested in what you owe them! So it is likely that you will get a bit of huffing and puffing. Don't panic! It's their job.

So, if they start threatening court proceedings, politely write back to them and point out that you have made the only proposals that you are able to in the circumstances. State, very politely, that, in the event that they issue proceedings, you reserve the right to produce all correspondence for the attention of the Court. If you have shown good faith, then it is likely the Court will respect that and will order payment along the lines of what you originally proposed anyway. Credit card and finance companies know this -- they just count on you not knowing this!

Alternatively, you could also say that it is disappointing that they will not accept your offer and, unless they can make other suggestions, you will have no alternative but to consider making an application for an Individual Voluntary Arrangement (more on this later in this series) or even bankruptcy. This often has the "I've just lost the contents of my bowel" effect and, in most cases, they will see sense.

Unfortunately, there are no guarantees. So, what if they sue you? Then they sue! By this time, your credit rating will have collapsed anyway. So when you receive the summons, simply make the same offer of payment -- and there is a section on the summons form to do this -- and return it to the Court.

For more on this subject, read these excellent posts on our dealing with debt board.