Talking to non-priority creditors - Ten Golden Rules
If you’re in debt and you can’t make all your monthly payments, it’s absolutely vital to approach your debts head-on – figure out exactly where you stand, and keep your creditors informed.
First of all, this can stop your debts getting any worse. It also shows your creditors you’re serious about dealing with your debts, and that might make them more willing to give you some leeway, whether that means accepting lower payments or holding off on legal action.
Priority debts first!
Make sure you pay the most important ones first – your ‘priority’ debts:
| Mortgage / Rent | Secured loans |
| Magistrates’ Court fines | County Court Judgments (CCJs) |
| Tax | Council tax |
| VAT | National Insurance |
| Gas, water, electricity & telephone | Child maintenance |
| TV licence |
| Some benefit overpayments & Working / Child Tax Credit overpayments |
| Hire Purchase (essential goods – like cars and washing-machines) |
If you can’t pay your priority debts, you should seek debt advice immediately, as the consequences of non-payment can be very serious. Depending on the debt, you could lose your home, have your utilities turned off, or even be imprisoned (although that’s not likely).
Once you’ve dealt with your priority debts, you can turn to your non-priority debts – everything from credit cards to personal loans and overdrafts.
Talking to non-priority creditors: Ten Golden Rules
1) If you can’t make a payment, let your creditors know as soon as possible.
2) Make sure you know how much you owe your non-priority creditors and how much you can pay them per month:
- add up your Total Debt (to your non-priority creditors),
- calculate your Disposable Income (how much you have left after all your monthly living expenses and priority debts).
(Be realistic about what you need to live on – it’s usually better to make a small payment reliably than promise too much and fail to keep it up.)
3) Offer each of your non-priority creditors a fair amount:
- divide your Disposable Income by your Total Debt,
- multiply that figure by the amount you owe each creditor and offer them that.
4) Don’t just tell them you’re having some financial problems – tell them what you’re doing about it. Are you looking for a (second) job, selling your car, getting debt advice, looking into debt solutions like debt consolidation, debt management, remortgaging, IVAs…?
5) Find out if they’re willing to reduce or freeze interest and / or charges for a while.
6) Tell them if you owe money to other creditors, and if any of them have accepted your proposals.
7) Even if they turn down your offer, pay what you’ve offered (which should be as much as you can afford).
8) Always phone and write. Phoning is often the best way to discuss complicated matters and reach agreements – but letters are proof what you’ve agreed, so keep everything they send you and copies of everything you send them.
9) Keep all your payslips & bills (from food bills to gas, electric and petrol). You may need to provide proof of your income and expenditure.
10) If they don’t get back to you, phone / write to them – as often as necessary.
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