Be Prepared - One Problem at a Time


There are two ways to approach the payment of debts:

1. Be In Control - Be Prepared

In advance, work out how much you will pay to each priority debt (you may have a small amount of money set aside for non-preferential debts). However, this figure should only represent a token gesture.

Priority creditors will not agree to any significant amounts being paid to, say, maintain a telephone (unless you need this for an acceptable reason like health), a car on hire purchase (again, unless you have a real need).

In fact, a preferential creditor would expect you to sell the car and/or any other substantial property that had equity (equity is money you have left after selling your property and paying off the credit company).

The amount you offer each creditor should reflect an obvious and relevant payment structure i.e. paying £12 per month on your TV licence will not impress the court that you are trying to offer £2 per month.

Send each creditor a list of your debts, how much you will pay each of them, and list your income and expenditure. Tell them you need a chance to correct your situation and that you are completely committed to paying your debts. And that you will increase the payment as and when you can (i.e. when you pay off one creditor, you will have the discipline to increase the amount paid to the other creditors: recommended).

2. One Problem at a Time

You need to evaluate which preferential creditor/s pose the most immediate and/or biggest threat to your basic needs and/or liberty. At this stage there is no point in worrying about any other creditor. You must contact that creditor and agree the lowest amount they will let you pay.

If you resolve the most serious problem, move on to the next creditor/s and again get the lowest payment arrangement you can get, and so on…

If one particular creditor is being uncooperative, offer what you think is fair, start paying that amount and tell them, that if after arranging payment with the other priority debts you have some money left, you will increase their payment.

Finally, priority creditors are set up to deal with debt problems. Talk to them, most will give you advice, all will give you a first chance. If you make an arrangement: stick to it. Make sure you only commit yourself to what you can afford. There is little point in calling a creditor and telling them you cannot make this month’s payment: you may not get a second chance.