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.


John Baird

Insolvency Adviser

Tel: 0800 063 9250

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