Token Payments

Arfhurdaly

I plan to write to my creditors and state that I can only pay a token payment towards my CC/Loan debts per month, maybe just £5 per creditor, and ask then to freeze my charges/interest on the accounts, so the debt decreases.
I intend to use this letter from National Debtline:
http://www.nationaldebtline.co.uk/england_wales/temp/6914_37661.pdf

Can anyone who has done this, tell me what the reaction from the lenders were? Did they stop the charges, or just go down the debt recovery (DCA) line?

Many thanks

Arhur

DarkConvict

They don't like it, as all they are interested in is getting the debt paid. Have you spoken to a debt charity, often going through CCCS,PayPlan or National debtline, and placing your account number with them can sway the creditors more. Some are easier to deal with than others, you'll have to see what response you get to your request. Remember to send a income/expenditure or SOA sheet from national debtline, and split your surplus between your creditors on a pro-rate basis, the one with the most debt gets the biggest chunk. But obviously if your income is very low then £1-5 to all creditors maybe your only option.

At the end of the day you pay what you can afford, and if it goes down the DCA route then unfortunately there is little you can do. If these are pre-april 2007 debts have you checked the CCA's as enforceable? http://forums.moneysavingexpert.com/showthread.html?t=1868507

Arfhurdaly

Hi thanks for the advice. I know they arent going to like it. But not sure what else i can do.

If they go down the DCA route, can you offer them token payments too?

Arfhurdaly

Also,

Is it better negotiating by yourself, or going through payplan?

Tixy

The key thing is that you will need to show that you can only afford token payments based on your income & basic living expenses. None will accept them for more than a couple of months withouth being satisfied that its all you can afford.

You will almost certainly get defaulted on all your debts (and these defaults will affect your credit rating for 6years). If you have any assets (a house with equity) then some of the creditors (or DCAs) may attempt to get take you to court to obtain a CCJ, but this would depend on a variety of issues such as how much you owe, how much any assets you have are and how long you may only be able to afford token payments.

Have you completed a detailed income & expenditure account (or SOA - statement of affairs?). It might be useful to post it on here in case we can recommend where you can make savings or point out if your creditors are going to look at it and consider your living expenses to be excessive.

Tixy

If you can only afford token payments whilst Payplan or CCCS will certainly advise you and help with things like template letters but they won't usually actually deal with the creditors themselves - you usually need to be able to afford £100 repayments each month for a debt management plan run by one of the free organisations.

Arfhurdaly

Thanks for the advice.

If i make token payments, and the CC company say they refuse to accept to freeze interest/charges, my debt will double more or less overnight, what happens then?

Sorry for the newbie questions.

Tixy

Ask away

Well firstly you ask them to reconsider (there is a letter to that effect on national debtline) then if they still refuse you might want to consider looking into the CCA enforceability (as per Darkconvict's link) if any don't have compliant CCAs this can be used to persuade them to not charge interest.

Sometimes a creditor won't stop interest but will sell the debt to a DCA (debt collection agency) after say 6months and then they will sometimes stop interest.

At the end of the day if they do refuse that won't alter the amount of monthly repayment you can afford even if the balance increases.
Maybe at some point in the future you will be able to make a reduced full & final settlement against the debt.

Usually though if it clear you are paying what you can afford it is usual for most to agree to freeze interest & charges - it can take a bit of pestering but most will eventually

(anecdotal evidence on here suggest Lloyds seems to be one of the most awkward at the moment until they sell the debt on).

Arfhurdaly

Ok This is what I plan to do:

• I will do a statement of affairs summary.
• Contact creditors to get the correct address/dept for letters
• Write a letter to each to request cessation of interest, inc statement of affairs.
• Cancel direct debits on accounts, and pay money via standing order
• Wait for the !!!!!! to hit the fan.

They can only say no. In which case, i have it documented that i tried to pay a nominal amount, but they said no. Will use this as evidence, if its escalated to court level.

Do you think this is the way to go?

captainhaggis

Hiya Arfur!

I've been making reduced payments to my creditors for about three years now without issue.

I initially made contact via my local council who had a debt help department but since then I've done things myself. If the lenders get shirty with me, I might go back, but at the moment everything is fine.

I don't know who your debts are with but here are some tidbits of information :

1) Cooperative Bank - pretty nice to deal with most of the time and usually very willing to offer a recduced payment if you can prove that it's all you can afford. They're also pretty helpful in terms of freezing interest and other charges. Now and again you'll get someone pretty hard but if it sounds like you're getting nowhere on the call, tell them you have to go (don't just hang up - these people keep notes) and call back later in the hope of getting someone else.

2) Egg - once the original agreement was set up I had absolutely no contact with them (two and a half years ago) until I needed to further reduce my payments two months back. The lady I spoke to was not particularly pleasant but it'd be wrong to say she was rude. They accepted my new reduced offer without asking for proof but did say that I would need to prove it again in six months. We'll see if that happens or, if like last time, it just goes away.

3) Lloyds TSB - Very hit or miss. When they're good they are very good. When they're bad, well, you get the picture. I normally find that if you're firm with them they'll set up arrangements for you. MAKE SURE AND GET THEM TO FREEZE THE INTEREST though. They are the worst for not doign so but not making that clear.

How's your credit file at the minute mate? If it's shot to sh*t already you've nothing to lose from just ignoring their requests for more money and making just token payments.

And you're right - it's important that you cancel the DDs immediately and change the payments to standing orders. BE WARNED, though. If you bank with one of the companies you are in debt to, they might set up the DD again without your knowledge and continue collecting the larger amount.

If this is the case, MOVE BANKS!

Arfhurdaly

captainhaggis wrote: »

Hiya Arfur!

I've been making reduced payments to my creditors for about three years now without issue.

I initially made contact via my local council who had a debt help department but since then I've done things myself. If the lenders get shirty with me, I might go back, but at the moment everything is fine.

I don't know who your debts are with but here are some tidbits of information :

1) Cooperative Bank - pretty nice to deal with most of the time and usually very willing to offer a recduced payment if you can prove that it's all you can afford. They're also pretty helpful in terms of freezing interest and other charges. Now and again you'll get someone pretty hard but if it sounds like you're getting nowhere on the call, tell them you have to go (don't just hang up - these people keep notes) and call back later in the hope of getting someone else.

2) Egg - once the original agreement was set up I had absolutely no contact with them (two and a half years ago) until I needed to further reduce my payments two months back. The lady I spoke to was not particularly pleasant but it'd be wrong to say she was rude. They accepted my new reduced offer without asking for proof but did say that I would need to prove it again in six months. We'll see if that happens or, if like last time, it just goes away.

3) Lloyds TSB - Very hit or miss. When they're good they are very good. When they're bad, well, you get the picture. I normally find that if you're firm with them they'll set up arrangements for you. MAKE SURE AND GET THEM TO FREEZE THE INTEREST though. They are the worst for not doign so but not making that clear.

How's your credit file at the minute mate? If it's shot to sh*t already you've nothing to lose from just ignoring their requests for more money and making just token payments.

And you're right - it's important that you cancel the DDs immediately and change the payments to standing orders. BE WARNED, though. If you bank with one of the companies you are in debt to, they might set up the DD again without your knowledge and continue collecting the larger amount.

If this is the case, MOVE BANKS!

Thanks.

My debts are with Halifax, Egg, CapOne and Barclays.

So how much is your token payment, if you dont mind me asking?

Did your lenders stop interest and charges?

I plan to move all essential (non debt) DDs, to another bank, so they cant DD for the CCminimums, esp barclays.