Managing your own debt – what if a creditor refuses an offer?

17 June 2008

Debt management companies like Gregory Pennington offer to help people out of their financial troubles by managing their debt for them. In other words, they’ll handle the paperwork and distribute funds among their unsecured creditors, as well as providing advice. They’ll also talk to their creditors on their behalf, asking them to accept lower payments, freeze interest and / or waive charges: for many people, this is the best thing about a debt management plan.

Do It Yourself debt management
However, a debt management plan isn’t for everyone. Some people are quite happy to manage their own debts – and negotiate with their own creditors. In many cases, it works well: they figure out their income and expenditure, draw up a repayment plan, discuss their financial problems with each creditor and agree to an affordable way of repaying what they owe.

But it doesn’t always work out. Lenders don’t have to agree to lower payments, whoever asks them to (they might be more likely to agree if they’re asked by a representative of a professional debt management company, but they might not).

The question is this: what do you do if you make an offer and the lender rejects it?

The most important thing to do is prove that you’re trying your best to pay back what you owe – that you’d like to stick to the original repayment agreement, but your circumstances have changed and you simply can’t afford it anymore.

Write a letter
So write to them again, explaining why you can’t keep up with your payments. Describe how your situation has changed. Include a budget that shows how much you earn and where that money goes, so they can see you’re paying as much as you can.

It’s important to tell them if you owe money to other lenders, and if they’ve agreed to accept lower payments (include copies of their letters, if possible). It’s also important to explain that you couldn’t pay more without reducing your payments to these other lenders – and that you’ve already promised them you’d treat all your unsecured creditors equally.

Finally (even though they’ve already turned down your offer of reduced payments), tell your creditor you’ll start making the payments straight away as a ‘goodwill gesture’. This will show them that you’re serious about repaying the debt – and if the case ever ends up in court, it’ll also show the judge that you’re doing your best.

Remember: whenever your creditor agrees to something, ask them to confirm it in writing. Make sure you hang on to all the letters they send you – and keep copies of anything you send them.

Do you need help managing your debts?
Dealing with debt isn’t easy. If you find you’re spending time and money on phone calls and letters to creditors and still not getting anywhere, it might be worth calling in the experts.

To find out how Gregory Pennington can help you manage your debts, just click here or speak to an expert debt adviser on freephone 0800 161 3516.

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Gregory Pennington are founder members of DEMSA (Debt Managers Standards Association).

DEMSA are the first trade body within the finance industry to successfully secure approval for its code of practice under the OFT Consumer Codes Approval Scheme (CCAS).