Published in Debt Advice Features on Sunday, April 29 2007

The most important thing to do is to communicate with your creditors. This may be directly or through credit counsellors. How long do you expect to be struggling for? Is it until your house sells for example so possibly at least six months? 

If it is under six months, it may be a good idea just to contact your creditors directly. Before you get in touch with them, make sure you work out a detailed income and expenditure for your entire household that shows how your circumstances are going to mean you will struggle paying. When you communicate with them do it in writing and always keep a copy of the letter. You can request that they only contact you back in writing and you should detail the reasons why you are going to struggle paying and when you anticipate your circumstances to change for the better and how. You will get one of two responses from this either positive or negative. If you get a positive reaction from the majority or all of your creditors then obviously you should manage fine until your circumstances change, just stick to the agreement you have made with your creditors, and if any other problems arise or your circumstances change for the better sooner just simply communicate with them. If one or two do object try to negotiate further with them as if you can’t get these to agree then it could put your whole financial situation in jeopardy as you can’t be preferential to particular creditors ֖ it is not fair on the ones who have agreed. If continuous negotiating doesn’t get you anywhere then it may be time to get outside help from either organisations such as the Citizens Advice Bureau or from credit counsellors, who should be able to provide advice free of charge.

If you feel it is going to take you longer than six months to a year to get your financial situation on track it may be wise to seek further advice from credit counsellors. They will examine your personal circumstances and outline your options. Sometimes they may even give you options you haven’t previously thought of or even heard of. For example you may be able to do what is known as a full and final Individual Voluntary Arrangement. This may be applicable if you are expecting to come into a sum of money for example from a house sale or windfall or inheritance. You could owe £50000.00 and be coming into £30000.00. This could be offered to settle the debts, and the remaining £20000.00 would be written off. Credit counsellors could help you arrange this, and so it is worth contacting them.

Credit counsellors can also hold more swayӔ with the creditors. Where you may have not succeeded in negotiating with the creditors, they may be more successful as the creditors tend to know that they can’t get away with as much, and know that credit counsellors are more familiar with laws and regulations surrounding debts. In other words they are less likely to take advantage.

Either way you have stuck to your credit agreement by communicating with your creditors, and even if your income and expenditure shows you have nothing left each month currently until your circumstances change as long as you offer a token payment of one pound, you are still within your credit agreement and this means the creditor cannot take further action against you. You must make what is know as a reasonable offer of repayment. This has to be justified by an income and expenditure, and if this shows a disposable income (what is left over) of one pound or less, that is a negative amount, then just paying a pound to each is deemed as reasonable. If this income and expenditure was to be submitted to a court and they agreed with it, it is all they would also ask you to pay each month, so if you consider this it is not worth the creditor’s while to take you to court as they will incur the costs of it. Remember this if they threaten you with court action. What I would;d say though is if they start to threaten or begin any sort of court proceedings, seek further advise immediately. Offering your creditor one pound per month is likely to get you more rejections in the negotiations early on, but it is worth keep negotiating sometimes as they will just try and push you further at first. If any creditor tells you they can’t accept a payment that low because of company policy for example. It is not correct, they may not like it, but as I said you are within the regulations of your credit agreement. What they may do is pass it on to a debt collectors. This isn’t something to worry about as usually they will stop the interest and charges, and are more likely to accept the offer of a pound. Again just keep trying.