Review Pack

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For people who have no available income to pay creditors

This pack is designed to help you negotiate with your creditors in a situation where you have no spare money or "available income" to pay them. It includes some example letters and a blank personal budget sheet. You should make photocopies of the blank personal budget sheet so that you have some spare ones.

Warning: This pack is about credit debts e.g. unsecured loans, overdrafts, catalogues, credit cards, credit sale agreements and so on. If you want help with priority debts - which includes things like rent/mortgage, secured loans, council tax, and electricity arrears - use our information pack "Dealing with your Debts" (PDF file - Requires Adobe Acrobat Reader™) and phone us on 0800 074 6918 for advice.

This factsheet outlines the following:

1. No Payments Or Token Payments
2. Reviews
3. What do I do if my offer is refused?
4. What if a creditor takes county court action?
5. Things creditors cannot do
6. What if my circumstances change?
7. Example letters

No Payments Or Token Payments

As you have no available income to pay creditors, you may have arrangements with them to make no payments. On the other hand you may be paying some creditors token payments. These are small monthly payments such as £1.00 per month. You may be making token payments because creditors have asked for this or because you prefer to pay something.

If you are finding token payments a struggle, you could always ask for the creditors to accept no payments.

You can use this factsheet to help you continue negotiating token payments or no payments.

 

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Reviews

At some stage you may receive a letter from a creditor asking for your situation to be reviewed or asking for increased payments. On the other hand, you may wish to contact creditors yourself towards the end of the review period to avoid interest payments starting again as some creditors do this automatically. If you are still unable to make an offer of payment, you will need to tell your creditor. You may find Letter A helpful.

A creditor may want to see an up-to-date copy of your personal budget sheet as part of the review. If a creditor sends you a blank personal budget sheet to complete, you could use this or to send your own instead. It is also a good idea to let each creditor know about all of your other debts so they can see that you owe money to more than just them.

Hopefully, your creditors will accept your request for no payments (or token payments) and agree to freeze any interest and other charges they are adding. In that case, continue making no payments (or token payments) but make a note of when the creditor is due to review the situation so you can be prepared.

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What do I do if my offer is refused?

Action creditors can take and what you can do.

If a creditor refuses your request for no payments (or token payments) and demand payments.

• Don't give up. Write to them again. Letter B may be useful for this.
• If some of your creditors have accepted your request for no payments, let the creditors who are refusing know about this.

If a creditor requests that you make token payments.

• You could offer token payments, particularly if it will result in interest being frozen. We would suggest you offer no more than, say, £1.00 per month, and you could ask for a payment book or payment slips to help you pay. However, you should not be forced to pay something if you cannot afford it.

If a creditor refuses your offer and passes your account on to their collections department, a debt collector or a solicitor.

• Collections departments, debt collectors and solicitors have no more powers than the original creditor. All they can do is ask for payment. If you receive a letter from any of these, write to them saying that you are unable to afford to make payments.Letters A and B may be useful.

If a debt collector comes to your home demanding payment.

• Door to door collectors have no right to enter your property or remove your goods. You do not have to let them in if you don't feel comfortable. Tell them you are already dealing with their company in writing. All they are allowed to do is ask for payment. Do not let them persuade you to pay something if you cannot afford it. You could then show them your personal budget sheet to prove that you have nothing available to pay. If you are having problems with a collection agency we have a factsheet on "Harassment." Phone us for advice.

If a creditor threatens court action.

Creditors may send you a default notice telling you how much you owe and that they may take further action if you don't pay. Creditors usually send this before sending your account to their collections department, a debt collector or a solicitor. Creditors have to send you a default notice for agreements regulated by the Consumer Credit Act before taking court action. If you get a default notice it does not mean you will definitely be taken to court.

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What if a creditor takes county court action?

If you receive a County Court Claim Form:

• It is important to remember that it is not a criminal offence to be unable to pay your creditors. You cannot be imprisoned because of this. The county court is just there to settle disputes about money owed and how to repay it.
• The county court should only expect you to pay what you can afford and you are given an opportunity to make an affordable offer on the "Reply Form" which is sent with the county court claim. You can use your personal budget sheet to help you complete the form. If you are unable to afford payments, you need to offer something - we would suggest a token offer of £1.00 per month. Remember to return the form within the time limit and to the creditor's address shown in the "Address for Service" box. Do not send it back to the court.
• The court will write to let you know how much you have to pay and when to pay. Follow the payment instructions carefully. Remember: payments are made to the creditor, not the court. You could ask the creditor for a payment booklet to make it easier to pay.
• It is very rare that you have to actually go to court. Everything is usually done by completing court forms. However, if you are told by the court to pay more than you can afford, you can ask the court to reconsider your offer, and you would then have to go to court.
• When you get a county court judgment (CCJ) interest on the debt is usually frozen automatically by the court
• As long as you do not miss payments or pay late, no further action can be taken by your creditor. So it is important to pay on time. You should not, for example, pay several instalments in advance and then miss payments, unless the creditor has agreed to this beforehand.
• Pay each and every month if that is what the court has told you to do. If you are asking for a payment booklet, don't delay payments because you are waiting for it to arrive.
• If you have a county court judgment and your debts are under £5,000 in total, you could ask for the county court to deal with your debts through an "Administration Order". We have a factsheet on "Administration Orders." Phone us for advice.
• For more information about court action, look in the back of our information pack "Dealing with your Debts". If you don't have a pack, phone us for advice. We also have a factsheet on "Replying to a county court claim form." Phone us for advice.

Interest

It is very important to try and get creditors to freeze interest, otherwise your debt will keep increasing. Keep trying to persuade your creditor to do this. Letter C may help you. If some creditors freeze interest, let creditors who are refusing to freeze interest know about this. Remember: if you are sued in the county court interest on the debt is normally frozen and it can be a good idea to remind creditors of this.

If creditors are refusing to freeze interest you could threaten to withhold payments until they do, particularly if your payments don't even cover the interest.

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Things creditors cannot do

Harassment
Your creditors are allowed to contact you from time to time to ask you for payment, but they must not threaten or harass you. If they do this to try and make you pay, they may be committing a criminal offence. We have a factsheet on "Harassment." Phone us for advice.

Below are some of the threats which you may across or hear about. However, these threats are often either untrue or misleading.

Imprisonment
You cannot be imprisoned because you cannot afford to repay your credit debts.

Bailiffs
Creditors cannot send a bailiff, or anyone else, to your home to remove goods just because you cannot afford to pay what they want. Bailiffs can only be used if you have a county court judgment and you miss payments that the court has ordered you to make. Even then, if they have never been in to your property they have no right to force entry, and it is fairly straightforward to stop bailiffs. We have a factsheet "Reducing payments or suspending a warrant on a county court judgment." Phone us for advice.

Your Home

• Creditors with whom you have credit type debts that are not secured on your home cannot take your home from you because you cannot afford to pay what they want. A creditor can only attempt to get a charging order on your home if you have a county court judgment and have missed payments or the court orders you to pay your judgment in one lump sum immediately and you do not pay. We have a factsheet on "Charging orders in the county court", phone us for advice.

Your Wages

• Creditors cannot have money taken out of your wages just because you cannot pay what they want. A creditor can only attempt to do this if you have a county court judgment and have missed payments. Even then, it should be possible to stop it happening. We have a factsheet on "Attachment of earnings in the county court." Phone us for advice.

Information

• Creditors will sometimes demand information which they do not need, for example: your employers address, or your bank account number. You do not have to give this sort of information to them if you do not want to. If they take court action, you will be asked to provide a bit of information about your employer and bank account on the court forms, but that is all.

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If my circumstances improve and I can make offers of payment

You could use our self-help pack to work out offers to each creditor and contact them with the offers of payment. If you have a county court judgment, there is no need to apply for increased payments through the court - just contact the creditor directly and start paying more, but make sure you pay by the date the court has already told you to pay by. Remember - don't offer more than you can afford. Phone us for advice.

You may be able to make payments to your creditors through a confidential debt management plan. This would mean making one monthly payment which is divided up and sent to your creditors for you. To see if you are able to do this, phone us for advice.

If my circumstances do not improve: What happens to my debts?

Write Offs

• It is usually very difficult to get creditors to write off debts and agree in writing that they have done so. They may only agree if you have been unable to make payments for a long time and you can show that there is no real prospect of you ever being able to repay the debt. This could be because of long-term financial problems due to illness, unemployment, retirement or low income (see Letter D)
• Although creditors may not say that they have written off debts they may eventually stop pursuing you if they think there is no prospect of you being able to repay the debt.

Bankruptcy

• Bankruptcy may be an option depending upon your circumstances. However there are a number of disadvantages and it is very important to get advice before following this option. We have a factsheet on "Bankruptcy." Phone us for advice.

Part Payment of the Debt

• As part of an Administration order (see court action above) you can ask for part of the debt to be written off. This is called a "Composition Order". This means that you only make affordable payments to the court for a limited time, such as 3 years, and then the remaining debt is written off. Phone us for advice.
• Under a full and final settlement arrangement, creditors can agree to accept part of the total amount you owe and write off the balance. However, this is not an option unless you have some money available. If you are considering this we have a factsheet on "Full and final settlement." Phone us for advice.

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Example letters

The example letters are designed for help you negotiate with your creditors. When you are writing them out you can change the letters by adding or removing sections; for example, the parts in square brackets '[ ]' can be left out if they are not suitable in your circumstances.

Letter A

Your name.........
Your address.....
Date

Name of Creditor...
Address.................
..............................

Dear Sir/Madam

Re: Account No/Reference No

I/we note that the above account is due to be reviewed.

I/we enclose a personal budget sheet which shows that my/our overall financial circumstances have not improved since you were last contacted. I/we would be grateful, therefore, if you would continue to accept my/our monthly payments, as already agreed, and also continue to freeze interest and other charges on the account.

Should my/our circumstances improve I/we will contact you again.

I/we look forward to receiving your comments and thank you for your co-operation in this matter.

Yours faithfully

(your signature)

Remember to keep a copy of all the letters and personal budgets that you send to your creditors!

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Letter B

Your name...........
Your address.......
...........................

Date

Name of Creditor.......
Address......................
..................................

Dear Sir/Madam

Re: Account/reference number

I/we refer to my/our recent letter and your reply regarding the above account.

I am/we are disappointed to learn that you will not accept my/our offer of payment. My/our offer has been worked out after careful assessment of my/our financial situation. As I/we have no available income, I/we have offered you a token payment as a gesture of goodwill. Making a higher offer to you would be unfair to my/our other creditors and I/we cannot afford to pay any more due to my/our current circumstances.

All of my/our other creditors have been sent a copy of my/our personal budget sheet and [all] [most] [or insert the number who have] have so far accepted my/our offer of payment.

If you were to sue me/us in the county court, I/we would continue to offer this amount and I am/we are confident it would be accepted by the court.

I/we would therefore be grateful if you would reconsider your reply to the above offer.

Yours faithfully

(your signature)

Remember to keep a copy of all the letters and personal budgets that you send to your creditors!

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Letter C

Your Name .................
Your Address...............
....................................

Date

Creditor.............
Address.............
.........................
..........................

Dear Sir/Madam

Re: Account/reference number

Thank you for your letter/telephone call of ____________ concerning the above account.

I am/we are sorry that you feel unable to suspend interest charges on the above account. [All] [most] [ or insert the number who have] of my/our creditors have agreed to suspend interest charges still accruing. They have accepted that to continue to charge interest would not assist me/us in my/our present financial difficulties, and can only serve to increase my/our total debt.

[As you are aware, I/we have already paid considerable sums in interest to my/our account. If interest charges continue the monthly instalments I am/we are paying will not even cover that interest. Also, the co-operation of my/our other creditors who have agreed to freeze interest already would be put at risk].

I/we would therefore be grateful if you would reconsider your decision not to freeze the interest. [This would mean that the monthly payments I/we make would actually reduce the balance owing to your company].

I/we look forward to hearing from you as soon as possible.

Yours faithfully

(Your signature)

Remember to keep a copy of all the letters and personal budgets that you send to your creditors!

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Letter D

Your name
Your address

Date:

Creditor
Address

Dear Sir/Madam

Re: Account/reference number ...............................................................

I/we note that the above account is due to be reviewed.

My/our overall circumstances have not improved since you were last contacted. As the enclosed personal budget sheet shows, I/we still have no available income to make payments to my/our creditors after allowing for essential expenditure.

You will note, that I/we have been [unable to make payments] [have only been able to make token payments] for [insert the number of months or years]. [ insert information here about your personal circumstances, e.g. long-term unemployment, sick, elderly, on a low income, lone parent etc]. Realistically, my/our circumstances are [never going to improve] [not going to improve in the foreseeable future].

In view of my/our long-term financial difficulties, I/we would ask you to consider writing-off the debt that I/we have with your company. If you are not prepared to do this, I/we would ask you to accept no payments for a period of six months and to freeze interest and other charges accruing on the account. If, at the end of this period, my/our circumstances have still not improved, I/we would ask you to reconsider writing off the debt.

I/we look forward to receiving your comments and thank you for your co-operation in this matter.

Yours faithfully

(Yours signature)

Remember to keep a copy of all the letters and personal budgets that you send to your creditors.

Remember: You can always Phone us for advice about any difficulty you are having in dealing with your debts

0800 074 6918

© Copyright National Debtline 1994 (updated May 2006)