Mortgage Advice - Dealing with Creditors

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Communication

Communication is the key to successful negotiations with creditors. Do not ignore letters, and bury your head in the sand. The problem will not go away. Respond to them promptly by letter or by telephone. If you promise to contact someone by a certain date, make sure you keep your promise and contact him or her even if only to tell him or her when you are going to make a payment. As long as you keep them informed of the situation they will understand.

Avoid Confrontation

As a debtor your objective is to persuade someone to be sympathetic to your circumstances. It never pays to get angry with anyone, even when you feel justified in doing so. Always remain polite and courteous even in the face of being treated rudely. If someone is acting negatively with you and you react negatively, this will make the situation worse and not help your cause. It is worth remembering that the people you are speaking to deal with debt problems every day and are trained to handle these situations sensitively. If they are rude to you, ask to speak to a manager or supervisor and explain your situation to them. It may not feel like it but these people are there to help you so let them do just that by keeping calm and in control. If you do this you are far more likely to get a positive outcome.

Put Everything In Writing

Always keep a log of all paper work. This starts with your records such as invoices, credit card statements etc. Every telephone call, letter written or received and offers made. Always make a note of the date and time and to whom you have spoken to and always confirm all conversations and offers in writing.

Be Realistic

If you make an offer of repayment, always make sure that you can do what you have promised. Offer the maximum amount you can comfortably afford. Do not worry if this is only a very small amount, it is better than nothing. This shows your creditor that you are serious about clearing your debt. Ensure you complete your statement of means as accurately as possible, not forgetting expenses such as school uniform, child minding, TV licence and essential house hold bills etc. Do not over estimate your expenses, the majority of creditors are fair and they will expect realistic payments, most will try to help.

Don't threaten creditors by saying you are going bankrupt

Most creditors and their agents hear these types of threats every day and it will not help at all. You will be putting up a barrier that will hinder negotiations. Creditors are likely to become more aggravated and their standard reply is 'go ahead and file for bankruptcy'. There is a way of doing this indirectly in the context of explaining your adverse financial circumstances, with an inference that bankruptcy is a possible alternative in the event that the creditor does not accept your offer.

Make your offer as brief and precise as possible

Explain the reasons for your current financial difficulties and then come to the point and make an offer. Make the terms of the offer precise. Do not leave things open and do not say you think you may be able to pay more in a couple of months. Set a figure and stick to it until you are sure you can afford to pay more.

If you get into trouble

If you get into trouble paying the negotiated amount and you can't adhere to the arrangement, contact the creditor immediately. Try to send a portion of the funds you promised with a proposal to make up the balance, or renegotiate the entire proposal. Do not wait for the creditor to contact you after you have missed a deadline for payment, as this will just make things harder for you, and the creditor will be less sympathetic.

Cover Yourself

If you receive Court or official papers, cover yourself. Make sure you know how much time you have. This is usually set out on the Court or official papers. Consult with either a Citizens Advice Bureau, insolvency practitioner or solicitor regarding your rights, or the means to resolve the claim without going to Court. If you contact the creditors, or their agent, and start negotiating the claim, make sure the response to deadlines is postponed to a date that you can keep to. This postponement must then be confirmed in writing.

Consumer credit act

A UK Act of Parliament aimed at protecting the borrower in credit agreements, loans, and mortgages. The Act requires full written details of the true interest rate (i.e. annual percentage rate) to be quoted; a cooling-off period to be given, during which borrowers may change their minds and cancel agreements; and all agreements to be in writing. The Act does not cover overdrafts.

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