Advice on writing letters to your creditors – Options you can consider when you can’t pay
June 4, 2015
There are several reasons why you might need to write to a creditor – maybe you are trying to stop harassment, make alternative payment arrangements, or dispute the debt they are chasing?
Whatever the reason, writing letters to your creditors is an important part of dealing with your debts responsibly, and indicates that you are not shirking your responsibilities. Being aware of the correct terminology and tone to use in these letters may help to achieve your desired outcome.
So what might you be trying to achieve?
Stop creditors adding interest and charges to an existing debt
You need to write a ‘holding letter’ which explains your financial position to the creditor. The first paragraph should clearly state what you are asking them to do, in this case freeze interest and charges on the debt.
The second paragraph of the letter needs to provide an explanation about why your financial situation has declined – often as a result of redundancy or ill-health.
The remainder of the letter should indicate your willingness to negotiate, and also state that you have enclosed proof of your current situation in the form of a medical report, or a statement of your financial affairs.
Letters of ‘good faith’
These essentially offer a lower payment amount, backed up by the reasons for your current financial situation as above. They prove your willingness to pay something towards your debt, and set the tone for future communications.
Creditors would rather receive part-payment rather than nothing at all, and you may find that they are open to further negotiations as long as you repay the amount stated on time.
When you can’t pay anything towards your debt
This type of letter lets the creditor know your dire financial situation, and asks that they give you a temporary breathing space to organise your affairs. You should also request that they freeze interest and charges on the debt.
Requesting to write off a debt
If there is no way of paying off your debt, your creditor may be willing to simply write it off. This often depends on the amount outstanding and your history with the creditor concerned.
The letter should include reasons why you cannot pay, along with proof in the form of bank statements or a statement of affairs. You need to state that you cannot foresee being able to repay the debt, and ask if they would be willing to write it off.
Stop debt collectors from calling
You can stop debt collectors from calling you on the phone by sending them a letter stating that you only want to receive correspondence from them in writing through the post. Also ask for written acknowledgement that they will adhere to your request. The collection agency is required by law to concur.
All the letters mentioned should include reference to the full amount owed, your account number with the lender, and terms of the borrowing. Corresponding with your creditors in this way gives you the opportunity to clearly state your case and tell them how you would like to manage the issue.
If they see that you are acting responsibly, they will be more inclined to respond positively to your request.
If you are experiencing debt problems or being harassed by creditors, Scotland Debt Solutions can clarify your financial situation and calculate an affordable monthly payment offer to creditors.
The start of a new year is the perfect time to take stock of your finances and put plans in place for a financially savvy year ahead. While you may feel your problems are insurmountable, there are always things you can do to help, most of them surprisingly easy. Here are 7 ways you can […]
If you have credit card debt which is attracting a high level of interest, moving this balance onto a lower interest card could save you a considerable amount of money. This process is known as a ‘balance transfer’, and if done correctly, this process could save you money and also reduce the time it takes […]
Many thousands of young Brits are being actively encouraged towards taking on debt and spending borrowed money even before they reach their 18th birthdays. That’s according to the price comparison website comparethemarket.com, whose research suggests that roughly one in four 16 and 17 year olds in the UK have been offered credit cards or asked […]
If you’re in serious debt with no hope of repaying your unsecured creditors, you don’t have to wait for a creditor to take legal action against you. You may be able to take matters into your own hands and apply for sequestration (bankruptcy in Scotland). This also prevents your situation from worsening. There are two […]
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
Scotland has a number of formal debt solutions that can help you deal with a difficult financial situation. It’s advisable to take action as soon as possible, however, to prevent your levels of debt escalating when interest and other charges are added. Obtaining professional advice is key in this respect. An approved money advisor or […]