Stage 6: Deal with non-priority debts
Contact your non-priority creditors
If you are working your way through the stages of our debt advice pack you will have listed any non-priority debts into the blank financial statement document at Stage 4 and worked out how much you owe. Also on this page there are examples of letters you could send.
Next, contact each of your non-priority creditors by phone, email or post. Whichever way you use, send each a copy of your completed financial statement, together with a covering letter that briefly explains why you have financial difficulties and what you are asking the creditor to do.
What if a debt is with a collection agency?
Contact the agency instead of the creditor, but do not treat the debt any differently. Debt collection agencies have no more powers than creditors and, like creditors, cannot send bailiffs to call unless they have a County Court Judgment and Warrant from the county court.
What if a debt is with my bank?
If you have an overdraft or other debt with the bank into which your income is paid, be careful. The bank can take money out of your account to pay money you owe them. If the bank does not agree to your offer or other request, arrange for your income to be paid in to an account elsewhere.
Find out about basic bank accounts on the Money Advice Service website
You may decide to arrange for your income to be paid into an account elsewhere before you contact your bank, just in case.
Could I get help to pay my water bill?
If you are struggling to pay a Thames Water bill and are in financial hardship, the Thames Water Customer Assistance Fund may be able to help. Any grant is usually a one-off payment only; the Fund does not provide a constant discount off bills. To get more information or an application form, call 0845 456 6863 or visit the Customer Assistance page on the Thames Water website.
What if I have a mortgage shortfall after my home is repossessed?
In some situations where you have had your home repossessed, you may later be told you still owe money. This happens when the amount your home was sold for was not enough to pay the outstanding mortgage and any secured loans. The money you still owe is called a ‘mortgage shortfall’. It is a non-priority debt but can be for a large amount.
Get more information on how to deal with a mortgage shortfall on the National Debtline website.
If you have money for non-priority debts
Before making offers to non-priority creditors, deal with any priority debts, as described in Stage 5: Deal with priority debts
How much should I offer each?
One way to work this out is to divide the money on a pro rata basis. So that, the larger the debt, the larger the monthly offer of repayment. This way is commonly used in debt advice and by courts.
To work out pro rata offers, for each debt in turn:
- Divide the amount owed on that debt by the total owed on all your non-priority debts.
- Multiply the answer by the amount of money you have left each month for non-priority debts.
- This gives you the monthly offer for that debt.
Example: Joe and Paula have £30 a month to pay the following debts:
- Credit card - £1,600
- Bank loan - £650
- Phone - £450
Total owed: £2,700
Their offers for monthly payments are:
- Credit card - £1,600/£2,700 X £30 = £17.78 a month
- Bank loan - £650/£2,700 X £30 = £7.22 a month
- Phone - £450/£2,700 X £30 = £5 a month
Enter each offer alongside the relevant debt on your financial statement. You can check your calculation, by adding up your offers to non-priority debts. The total should be the same as the monthly amount you have in “Box E Money for credit debts” of your financial statement.
What if my offer is less than the interest?
If your offer is less than the monthly interest being charged on a debt, ask the creditor to freeze interest and charges.
What do I say in my letter?
We have created a sample letter to ask a non-priority creditor to accept reduced payments. You can download it here
Amend and send the letter to each creditor with your financial statement.
When should I start paying?
As soon as you can, do not wait for the creditor to accept your offer. Some creditors wait for payments to start before they will agree to an offer.
If you do not have money for non-priority debts
This may be because your income is very low or because any money left after expenses is going to priority debts. What you ask the creditors to agree depends on your circumstances. If you later start work or clear a priority debt, you may then have (more) money for non-priority debts.
I can afford token payments now and maybe more later
You could ask each creditor to accept, say, £1 or £2 a month for the time being, freeze interest and review the situation in, say, six months. Enter your token offer alongside each non-priority debt on your financial statement.
You can use our sample letter to ask a non-priority creditor to accept token payments for the time being.
Amend and send to each creditor with your financial statement.
I cannot afford even token payments now, but may be able to afford to pay later
You could ask each creditor to suspend payments for the time being, freeze interest and review the situation in, say, six months. Enter “Nil” alongside each non-priority debt on your financial statement.
You can use our sample letter to ask a non-priority creditor to suspend payments for the time being.
Amend and send to each creditor with your financial statement.
If you are working, creditors will probably expect you to pay something. Check again to see whether you could afford token payments.
I will never be able to afford repayments
If you are never likely to work, because for example you are ill or disabled, creditors may agree to write off the debts. Enter “Nil” alongside each non-priority debt on your financial statement.
You can use our sample letter to ask a non-priority creditor to write off your debt for the time being.
Amend and send to each creditor with your financial statement and medical evidence.
If you own your own home, get advice before asking for debts to be written off as creditors may try to secure them against your home.
