How to settle debt

Hi, I'm looking for some general advice about how to go about settling my debt. I owe around £40k in total on credits cards, an overdraft and a bank loan. About 5 years ago I entered into an arrangement with my creditors (an informal one, not an IVA) to pay £1 a month because mine and my husband's income dropped and we could not longer afford to service all the debt. All the creditors agreed to freeze the interest on the debts. Over time I've gradually increased the payments but am still only paying between £1 and £25 a month on each debt.

I'm now about to inherit some money and will have about 15,000 available to settle as much of the debt as possible. Should I write to each of the creditors individually and offer them all say 30% of what I owe? Or should I try to prioritise the debt and pay off either the biggest or the smallest first? As none of them are interest-bearing now it makes no difference from that point of view.

Also, are there any letter templates on here that I could use to approach my creditors?

Any advice much appreciated.
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Comments

  • Keezing
    Keezing Posts: 322 Forumite
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    This is a great resource and includes some template letters: https://www.nationaldebtline.org/EW/factsheets/Pages/fullandfinalsettlementoffers/lumpsumoffers.aspx

    The main rules when negotiating are start low and keep everything in writing. You can talk to them on the phone if you want but insist on confirmation in writing.

    Personally I would prioritise the smaller debts, as it's always good to get a lender off your back, and removes the risk of litigation.

    Other people may prefer to clear the larger debts.

    Good luck!
  • Arleen
    Arleen Posts: 1,164 Forumite
    Combo Breaker First Post
    Once you let them know that you have money and can pay more, they will start bearing interest again and they will likely ask for new income and expenditure sheets from you.

    Also to need to pay just 30% is a massive cut for them. This sort of offers usually happen when no one pays and it's sold 2nd or 3rd time, making the debt rather hopeless case, where any money is better than nothing.
  • Keezing
    Keezing Posts: 322 Forumite
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    Arleen wrote: »
    Once you let them know that you have money and can pay more, they will start bearing interest again and they will likely ask for new income and expenditure sheets from you.

    Also to need to pay just 30% is a massive cut for them. This sort of offers usually happen when no one pays and it's sold 2nd or 3rd time, making the debt rather hopeless case, where any money is better than nothing.

    Once an account has defaulted, the lender (or DCA) will not reinstate interest.

    Given the age of these debts, it's very unlikely that the accounts are still open.
  • izzibear
    izzibear Posts: 12 Forumite
    I forgot to say the debts are all with debt collectors now, although I'm not sure if that makes any difference.

    I was also wondering if they might start asking for income and expenditure details again. Since this is an informal arrangement and not an IVA, do I have to give them those details?

    I suppose the risk if I refuse is that they will issue proceedings, but how likely is that after the length of time the debts have been running? They've already been with debt collectors for several years and have only been getting a fraction of the payment each month so surely it would be worth their while to consider a lump sum, even if it's only 30%?
  • fatbelly
    fatbelly Posts: 20,448 Forumite
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    edited 15 March 2017 at 1:30PM
    Those debt collectors may well be debt buyers, particularly if Lowell or Cabot feature.

    Your situation of a very long-term dmp, debts with companies who have paid maybe 10p in the £ for the account, lump sum cash available without borrowing, is ideal for full & final offers.

    I'll post a link to show some of the percentages you might be able to get

    http://forums.moneysavingexpert.com/showpost.php?p=69978335&postcount=1179
  • sourcrates
    sourcrates Posts: 28,831 Ambassador
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    Is Lowell one of your creditors ?

    They regularly offer discounts of up to 60% and allow you to repay the balance over time.

    Other specialist debt purchasers offer similar deals.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Keezing
    Keezing Posts: 322 Forumite
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    izzibear wrote: »
    I forgot to say the debts are all with debt collectors now, although I'm not sure if that makes any difference.

    I was also wondering if they might start asking for income and expenditure details again. Since this is an informal arrangement and not an IVA, do I have to give them those details?

    I suppose the risk if I refuse is that they will issue proceedings, but how likely is that after the length of time the debts have been running? They've already been with debt collectors for several years and have only been getting a fraction of the payment each month so surely it would be worth their while to consider a lump sum, even if it's only 30%?

    Use the income and expenditure forms to demonstrate that you are unable to afford "regular" repayments and if they don't accept your settlement offer they will be waiting a VERY long time for their money.

    You may also choose to issue CCA requests to ascertain the enforceability of your debts. This may influence who you choose to pay off, I.e. If the debt is enforceable you should focus on clearing that one.
  • National_Debtline
    National_Debtline Posts: 7,998 Organisation Representative
    First Post First Anniversary Combo Breaker
    izzibear wrote: »
    I was also wondering if they might start asking for income and expenditure details again. Since this is an informal arrangement and not an IVA, do I have to give them those details?

    Hi

    You don’t have to supply your income and expenditure details, but if they show that you can only afford small monthly payments it could help your settlement offers.

    James
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
  • izzibear
    izzibear Posts: 12 Forumite
    Yes Cabot and Lowell are two of them. Also Blair Oliver Scott, Moorcroft, Arrow Global, CapQuest and Wescot. It does look like they've bought the debts then and might be willing to take a relatively low settlement figure.

    I hadn't realised that checking their enforceability was an option - I would have thought that since I've acknowledged the debts and am paying them, that means they remain enforceable and stops the 6-year limitation period from starting to run?

    Although I think I've read something about debts not being enforceable if the creditor can't produce a copy of the original credit agreement, so maybe that's worth checking.
  • izzibear
    izzibear Posts: 12 Forumite
    Thanks for that link, it's really useful and I'll bear it in mind when I write to them all.
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