How do I… deal with my creditors?

When you are in debt and beginning to struggle with the repayments, you may find that your creditor(s) increase their communication with you. At Payplan we hear a lot of people say that they are unable to cope with the constant contact from their creditors or they don’t know how they should be dealing with them.

This blog is going to look at ways in which you could deal with your creditor(s) to make the repayment process as stress free as possible.

When you take out credit, whether a credit card, store card, overdraft or loan, you sign a credit agreement to say that you will maintain contractual payments towards what you borrow until it has been paid in full.

Creditors are aware that unforeseen circumstances occur; such as redundancy, illness or additional expense. If something happens and you suddenly find yourself unable to make your monthly payments, it is extremely important to contact your creditor(s) as soon as possible to inform them. By doing this you can discuss with them how you are going to proceed with future payments. If your situation is going to last longer than one month, to avoid your creditor(s) pursuing legal action against you, you should come to an agreement to make reduced payments until you find yourself in a better position.

Most high street lenders have the capability to deal with customers that are in financial difficulty, so by speaking with them you could get advice on how to deal with your debts. Payplan have a good relationship with a lot of these lenders, and they often direct their customers to us for free to client debt advice.

As well as maintaining contact with your creditors it is important to maintain some form of payment to them. We would usually recommend our client send in whatever they can reasonably afford.

To conclude, when you find yourself in financial difficulty it is always recommended that you keep in contact with your creditor(s) at all times and to maintain small payments.

If you find yourself struggling, it is important to seek help as soon as possible. You can speak to one of our trained specialists on 0800 2945205 or fill in our online referral form and we will call you back.

Written by Gemma on April 27th, 2012

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How long can my creditors chase me?

A question that I often come across from people struggling to pay their debts is ?how long can my creditors chase me?? The answer is until you have paid them what you owe. However, if communication between the debtor and the creditor breaks down and enough time elapses, then the debt can be un-enforceable. Let me explain?

All creditors have a fixed period of time, as stated in the Limitations Act of 1980, in which that they can pursue a debtor for a debt. The act states that unsecured debts, such as credit cards, store cards, overdraft, bank loans and catalogues, become ?statue barred? if there has been no contact between the two parties within a six year period. The creditor has not already obtained a judgment against you

and

You, or anyone else owing the money (on a debt in joint names) have not made a payment on the debt during the last six years

and

You have not communicated to the creditor admitting you owe the debt during the last six years.

After six years if the creditor makes contact with the debtor and asks for a payment, the debtor does not have to pay them.

These instructions do not apply to debts in Scotland. Under Scottish law, if a lender allows time to pass without receiving any payment an action for recovery may become barred under the Prescription and Limitation (Scotland) Act 1973. (For details of this Act see Gloag and Henderson 12th edition at Chapter4.). These debts are completely extinguished and cannot be enforced. Once the prescriptive period expires the debt cannot be allowed as a deduction.

To explain it further here is a possible scenario?

You take out a credit card, after a period of time you lose contact with your credit card provider and stop payments. You then receive a letter from them to say they want you to resume payments and clear the debt. The time period between your last contact with the creditor ? whether it was a payment made, a letter or a telephone conversation ? has been six years, this means that the debt has become ?statue barred? and the creditor is no longer allowed to pursue you for payment or take any further legal action against you.

If a creditor continues to contact you once the debt becomes ?statue barred? then you are entitled to report them for harassment, as well as making a complain to the Office of Fair Trading.

Written by Gemma on March 20th, 2012

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IVA: Do all my creditors have to agree to the terms?

If you owe more money than you can afford to repay and you’re wondering whether an IVA (Individual Voluntary Arrangement) is the best way for you to clear your debts, you probably have a few questions you’d like answered. Of course, an IP (Insolvency Practitioner) would be able to answer your questions, but some questions are quite straightforward – like this one….

If you do decide to enter an IVA – and your IP is confident it’s the right approach for you – you’ll work with him/her to draw up an IVA proposal, which sets out how you think the IVA could work (e.g. how long it would run for, and how much you’d be able to pay).

Your creditors will all have a chance to ‘vote’ on this IVA proposal – and it’s important to note that the proposal doesn’t have to be accepted by all of them.

Your IVA will be able to go ahead if it’s approved by lenders who account for at least 75% of your unsecured debt. So, if you owe £20,000, you’d need to have your proposal approved by creditors who collectively ‘own’ £15,000 or more of your debt. (Note that they may wish to request some changes to your proposal first – you and your IP will have to make yourselves available over the phone so you can discuss them.)

If it is approved by enough of your lenders, your IVA will be able to start. It will become legally binding on all your lenders – not just the ones who approved it, but also any lenders who rejected it, or who didn’t vote at all.

Your IVA will begin and you’ll begin making your monthly payments to your IP, who will subsequently distribute money among your lenders as agreed.

Since it’s a legally binding agreement, your lenders won’t be able to change their minds or try to take any legal action against you to try to recover their money – including trying to make you bankrupt – as long as you stick to your side of the agreement. If you do, your outstanding unsecured debt will be written off once the IVA has come to a successful conclusion (in most cases, this would be after 5 years).

Like any debt solution, an IVA has its ‘pros and cons’. Most people would consider the following to be the most important ones:

Pros

Your outstanding unsecured debt will be written off when your IVA comes to a successful conclusion.Your payments to your IVA will be set at a level you can afford after you’ve taken your essential expenses into account – so you’ll know they won’t take up money you need for things like your mortgage/rent, utility bills and food.It’s extremely unlikely you’d lose your home in an IVA (although you may have to release equity from it). In fact, it can help you keep your home, since your IVA payments would be calculated to make sure you could afford your mortgage.

Cons

An IVA lasts 5 years. Bankruptcy could be over in just 1 year (although you’d probably have to make payments for up to 3 years).You may have to release equity from your home so you can pay more into the IVA.An IVA will stay on your credit report for 6 years from the time it starts.

The article was written by ThinkMoney.com. If you are considering entering into an IVA or other debt solutions visit the site today.

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