Informal Offers

Overview

  • Can be self-help negotiated or with a money adviser
  • Usually a temporary agreement with a review
  • A reasonable income & expenditure must be produced
  • Must have something to offer on a regular basis - disposable income
  • Offers can be token, very low such as £1 per month
  • Interest & charges may not be frozen but this can be requested & usually agreed
  • Debts may take a very long time to repay
  • Some creditors may accept but not others
  • Credit rating will be affected, a registered default will last 6 years, starting from the date of the default
  • Physical payments cannot be refused, however small they are
  • Offers to old debts may affect your statute barred rights, contact us if this applies to you

How it works

  • You contact your creditors and negotiate an agreement to repay all or some of the debts. Negotiated agreements may involve either or both of these:
  • (1) payments from your income
  • (2) payments from lump sums you receive, for example from an inheritance or from relatives
  • Your creditors may be prepared, at the start or later, to agree to write off part of what you owe them. If they do so, they should confirm this agreement in writing.
  • (1) Payments from income: you need to work out how much you can afford to repay, after allowing for your essential household and personal spending such as mortgage or rent, heating, utilities, and housekeeping. You should offer to share any extra income among all your creditors, based on the amounts you owe them. This means that all your creditors are offered their share of what you can afford. You should also ask your creditors to freeze any interest or charges. Your creditors will expect you to give them regular updates of your income and expenditure so that they can see whether you can increase your payments.
  • (2) Payments from lump sums: you may make payments towards your debts from a lump sum you receive and which your creditors may agree to accept in settlement of what you owe – that is, they agree to write off the balance they are owed. However, if you do have extra income after paying your everyday expenses, they may expect you to make at least some payments from that as well. If you can’t make payments temporarily, for example because of a short-term illness, creditors may agree to accept no payments or token payments of say £1 a month, but only usually for a limited period.
  • If you can’t make payments temporarily, for example because of a short-term illness, creditors may agree to accept no payments or token payments of say £1 a month, but only usually for a limited period.

Pros

  • Fair and open way of sharing payments, widely understood by creditors
  • You can ask if you can reduce your payments if your situation gets worse or you face unexpected essential spending
  • You can negotiate these payments yourself, or Money Advice Hub can help with drawing up your personal budget sheet & make offers to your creditors based on this. You will need to make these payments each month.
  • Creditors may be prepared to write off the balance of what you owe after a period of time if:
  • i) you have shown that you have made every effort to pay them back as much as you can, and
  • ii) you have maintained regular payments to them.
  • You can still have a basic bank account when making an agreement with creditors.

Cons

  • Creditors may refuse to agree with what you propose (but it’s always worth asking them to reconsider), although they can’t refuse to accept any payments you make to them.
  • Creditors may refuse to freeze interest or charges (but it’s worth asking them to reconsider). If you can only afford small payments, they may not be enough even to cover interest or charges, & your debts will increase.
  • Creditors may refuse your proposal unless it’s made through a debt advice agency regulated by the Financial Conduct Authority, which will have independently & professionally reviewed your circumstances. You can complain to the Financial Ombudsman if this happens.
  • You remain liable to pay the full amount of your debts, although you may be able to persuade your creditors to agree to write off part, or even all of it, depending on your circumstances.
  • Creditors could still take action against you, for example by getting a court judgment & then an order that creates a charge on your home, unless they have specifically agreed not to do so in return for the payments made under the informal arrangement.
  • You are responsible for administering all the payments yourself & keeping creditors informed of your circumstances. If you have online banking, setting up & managing payments can be very simple.