As an alternative to formal debt solutions such as an Individual Voluntary Arrangement (IVA) or bankruptcy, it may be possible to enter into an informal agreement with your creditors.
You can approach them directly, or through an intermediary such as an insolvency practitioner, to set out clearly what you can afford to pay (either in instalments or in a lump sum) and request that they suspend any further interest or charges due under the credit agreement.
If accepted, the creditor may agree to write off or suspend collection of the balance of the remaining debt or freeze interest. The debtor should request, when appropriate, that the creditor agree in writing to change the credit reference file details to show that the balance has been paid and the date this happened.
This arrangement can be effective but is not legally binding on creditors and a request can lead to collection proceedings being started as it is an admission that you are unable to meet your existing commitments.
When to consider Non-Statutory (Informal) Debt Solutions
This option may emerge when an individual has a sustainable income stream and is likely to be able to pay their debts in full given time, or alternatively maybe able to access money, perhaps through the sale of an asset, savings or from a friend or relative. If an individual’s circumstances are unlikely to change for the better in the future, a lump sum payment of part of the debts may represent the best option for creditors who may consider some element of debt forgiveness or write-off.
Next steps
If you are uncomfortable in approaching your creditors with an informal solution then we can assist. We deal with debtors and creditors on a daily basis and can negotiate on your behalf to try to ensure that the most beneficial outcome for all parties is achieved.
At a consultation meeting we will review your personal circumstances and if an informal solution may be a good option advise on a suitable offer to be made to your creditors. We will then put the offer in writing and request that the creditors respond in writing. All correspondence is scanned and saved onto our document management system in case there is a dispute in the future.
If accepted we will then make the necessary arrangements to process the payments and, for settlements which are large or particularly important, we would encourage you to have a formal agreement drawn up by a solicitor and signed by all parties. If the offer is rejected we can advise and assist with other debt options available to you.
