When we have many debts our senses develop a pessimism and defensiveness that can be far from reality. We believe that every creditor wants ever penny ‘NOW’! That they will turn into monsters and descend upon us inflicting financial destruction and many years of darkness, and us such we well ‘fight them on the beaches’..Well, this need not be the case.
So if you can’t pay your creditors what are the best and worst things to say?
People find themselves in financial difficulty for any number of reasons - unemployment, illness, marital breakdown or other unforeseen circumstances. The key to solving the financial difficulty is communication - talking to creditors is an absolute must. If your creditors don't know you're having financial difficulties, they'll assume you don't want to pay and start taking action against you. For example, they could take you to court or, in some cases, they could send bailiffs round to take away your belongings. It's almost never too late to start talking to your creditors and most creditors will appreciate it if you contact them.
When you contact your creditors, explain the reasons for your current financial difficulties. If the first person you speak to is unhelpful, ask to speak to someone more senior. Explain that you're trying to deal with your debts and you will contact them again shortly when you're in a position to know how much you can afford to pay. Ask them if you can stop paying interest on your debts in the meantime. This is called ‘freezing the interest’. If you have to carry on paying interest, your debt will just keep on growing.
Make a list of all the people you owe money to and how much you owe them. Then work out how much you can afford to pay. To do this, you'll need to draw up a budget, listing all the income and outgoings of your household. Once you've worked out how much you've got left over after paying your outgoings, you'll be in a position to go back to your creditors and explain how you can pay off the arrears.
Make your offer as brief and precise as possible coming straight to the point. Make the terms of the offer precise. Do not leave things open and do not say you think you may be able to pay more in a couple of months. Set a figure and stick to it until you are sure you can afford to pay more.
Don't ignore creditors' letters or phone calls. Keep copies of all the letters you write and make a note of all telephone calls or meetings. This should include the name of the person you spoke to and what you agreed.
If you make an offer of repayment, always make sure that you can do what you have promised. Offer the maximum amount you can comfortably afford. Do not worry if this is only a very small amount, it is better than nothing. This shows your creditor that you are serious about clearing your debt. Ensure you complete your statement of means as accurately as possible, not forgetting expenses such as school uniform, child minding, TV licence and essential house hold bills etc. Do not over estimate your expenses, the majority of creditors are fair and they will expect realistic payments, most will try to help.
As a debtor your objective is to persuade someone to be sympathetic to your circumstances. It never pays to get angry with anyone, even when you feel justified in doing so. Always remain polite and courteous even in the face of being treated rudely. If someone is acting negatively with you and you react negatively, this will make the situation worse and not help your cause. It is worth remembering that the people you are speaking to deal with debt problems every day and are trained to handle these situations sensitively. If they are rude to you, ask to speak to a manager or supervisor and explain your situation to them. It may not feel like it but these people are there to help you so let them do just that by keeping calm and in control. If you do this you are far more likely to get a positive outcome.
Don't threaten creditors by saying you are going bankrupt. Most creditors and their agents hear these types of threats every day and it will not help at all. You will be putting up a barrier that will hinder negotiations. Creditors are likely to become more aggravated and their standard reply is 'go ahead and file for bankruptcy'. There is a way of doing this indirectly in the context of explaining your adverse financial circumstances, with an inference that bankruptcy is a possible alternative in the event that the creditor does not accept your offer.
Helen says: So the message is if you do have debt problems don't hide under a stone in the hope that they will go away - they won't. You really to need to tackle the problem, but equally you don't need to panic. There is help out there so go and look for it before it really does become too much of a problem.
