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Sample letters to creditors

Letters one to six are designed for a third party to write on behalf of a client:
1. Request to suspend payments and freeze interest for a set period (#letter1) 2. Offer of a token payment and request to freeze interest (#letter6) 3. Request a write off of the full debt (#letter3) 4. Offer of pro-rata payments and request to freeze interest (#letter4) 5. Offer of full and final settlement (#letter5) 6. Request a write off from a catalogue company (#letter6)

Letters A to C are designed for the clients/debtors use:


a. Offer of a pro-rata payment (#lettera) b. Offer of token payments (#letterb) c. Unable to offer a payment (#letterc)
You will see that paragraphs have been highlighted for you to give as much detail as possible with regard to age, family situation, background, medical condition, and any other relevant factors which may have led to the problems now being encountered.

Letter One
Request to suspend payments and freeze interest for a set period.
This is used as a temporary measure only. It is useful for people who are experiencing temporary difficulties, but whom may be able to resume payments at a future date e.g. someone in hospital who has had benefit reduced, an intention to resume work, if a lump sum is expected in the near future etc. It can also be useful for someone who may need some time to organize their finances. This strategy gives a period of time where no further collection action is taken, so chasing letters and phone-calls should cease. It is important that the creditor agrees to freeze the interest and charges as this will prevent the indebtedness increasing further. It does however require a review at a later stage, when other options will then need to be considered, depending on the circumstances at the time of the review. Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed letter

of authority for your records. Enter a paragraph explaining personal circumstances for the financial difficulties. You may also need to give reasons for any high expenditure on the financial statement especially if this expenditure relates to their illness We enclose a financial statement prepared with the client, using realistic budgeting figures, given their current circumstances. This also shows the current level of debts outstanding. You can see from this information, that the client is finding it difficult to meet even their basic needs at this time. Therefore we are unable to make any realistic offer of payment at this time. We request therefore that you give consideration to allowing a suspension of the payments on the account for a period of ...... months, when the situation can be reviewed. Include here any possible future potential if appropriate to start repayments again e.g. expecting to go back into work. If interest and charges are being added to the account, it would be appreciated if you would agree to waive these during this time, so that the indebtedness does not increase further. We hope you will be sympathetic to our request as this would greatly relieve some of the stress the client is experiencing. I look forward to a positive response in the near future. Yours faithfully Your Name Your Job Title Encs

Letter Two
Offer of a token payment and request to freeze interest.
This is used usually when the client has no real available income, but wishes to make some payments. It is also sometimes the only agreement a creditor will make on a temporary basis. It does show goodwill to the creditor, and they will usually agree to cease any further interest charges on the account. It must be stressed that the client should not be making payments they cannot afford and which would have a detrimental effect on their wellbeing. Again this is only a temporary measure, and maybe followed by a request to write off the debt, if circumstances have not improved. Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed authority for your records. Enter a paragraph explaining personal circumstances for the financial difficulties. You may also need to give reasons for any high expenditure on the financial

statement, especially if this relates to their illness. We enclose a financial statement prepared with the client, using realistic figures, given their current circumstances. This also shows the level of debt outstanding. As you can see the client is finding it difficult to meet their basic needs. We would not normally make an offer of payment in these circumstances, but as a gesture of goodwill, the client wishes to offer a token payment of ........ per month. We appreciate this is a low offer, but it is the maximum the client can afford to pay regularly at this time. We would be grateful for your kind consideration of this offer and would request that you freeze the interest and charges on the account, so that the situation does not deteriorate further. If you are agreeable to receipt of this payment, it would be helpful if you could supply a payment book (or standing order or direct debit form if appropriate). I look forward to your response in the near future. Yours faithfully Your Name Your Job Title Encs

Letter Three
Request a write off of the full debt.
This is usually used when there is no available income and the personal circumstances are unlikely to improve in the foreseeable future. It is very important in this sort of letter to include full facts regarding the client, such as their age, medical condition, family situation, background, and any events that have led to the problem occurring. It is worth pointing out in your letter that clients with some medical conditions would find it difficult to maintain a regular payment, and that if the payment being offered was very low, the administration costs of collecting the debt, would be higher than the payments received. Beware if the client owns a property with equity available, or any realizable assets of value, as the creditor may decide to take court action instead of agreeing to the write off request. Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed authority for your records. Enter a paragraph explaining personal circumstances for the financial difficulties. You may also need to give reasons for any high expenditure on the financial statement, especially if this relates to their illness. We enclose a financial statement prepared with the client, using realistic budgeting figures based on their current circumstances. This also shows the level of debt outstanding. You can see from the information that the client is finding it difficult to meet even their basic needs at this time. Thus we are unable to make a constructive

suggestion as to how an offer of payment can be made. In these circumstances we would usually suggest that the interest be frozen and payments suspended for a while, with a review of the finances at a later date. However, in this instance as I have highlighted, the position now and for the foreseeable future appears bleak, with circumstances very unlikely to improve. Given the erratic nature of the client's illness, it is also doubtful that they would be able to maintain a regular payment, were any monies available. Give details of nature of ill health and how these debts are impacting on the ill health-enclose medical evidence if available. Given these harsh circumstances we would ask that you give consideration to writing off the outstanding debt. We acknowledge that this is an exceptional request, but we feel that this course of action would greatly relieve the anxiety and distress that the simple existence of these debts are causing, especially as they cannot foresee a time when they will be in a position to pay. We ask that you give this request your most sympathetic consideration, and thank you for your attention to this request. We look forward to hearing from you soon. Yours faithfully Your Name Your Job Title Encs

Letter Four
Offer of pro-rata payments and request to freeze interest.
This is used when there is available income that is being offered to all creditors based on a fair and equitable distribution. (See preparing a personal budget for an explanation of how to work out these amounts). Be careful that the offer is sustainable for the foreseeable future, as clients can be tempted to offer more than they can afford due to fear of creditors. It is widely accepted by creditors, as this is the way a court would administer an administration order. However some creditors push for higher payments. If the client can only afford the payments being offered, it would be wise for them to make the payments whether or not the offer is accepted. This shows goodwill, and will be reviewed favorably if the creditors insist on taking further action through the courts. Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed authority for your records. Enter a paragraph explaining personal circumstances for the financial difficulties.

You may also need to give reasons for any high expenditure on the financial statement, especially if this relates to their illness. We enclose a financial statement prepared with the client, using realistic budgeting figures based on their current circumstances. We are offering a payment to all creditors based on an equitable distribution of the surplus income available. We appreciate this represents a reduction in the contracted repayments, but at this time we believe this is the best offer the client can afford to maintain regularly. Should circumstances improve we have advised the client that the payment should be reviewed, and we will contact you accordingly. It would be helpful of you could provide a payment book, standing order/direct debit form (delete as appropriate) so that the payments can commence as soon as possible. It would be helpful if you would give consideration to freezing the interest so that all payments received are used to reduce the debt. We hope you will give kind consideration to this offer, and we look forward to a positive response in the near future. Yours faithfully Your Name Your Job Title Encs

Letter Five
Offer of full and final settlement
It may be that a lump sum is available e.g. from sale of a property or asset, or from a backdated payment of benefit or Disability Living Allowance, family member paying off debts etc. It is possible to offer creditors a proportion of the amount owed in full settlement of the outstanding debt, with the creditor agreeing to write off the remaining debt. You do not have to offer the full amount you have received if some of the funds are required for other purposes e.g. furniture, redecoration etc. Once a figure has been decided on, the money is split between all creditors on a pro-rata basis. It is worked out the same way as you would calculate an equitable distribution. Enclose a summary of this calculation with the request. If you are going to offer a full and final settlement, to achieve a better result it may be advisable to do this via a third party e.g. a relative or friend, as this could prevent further attempts to recover the remainder of the balance at a later date. It is important to receive written confirmation of their acceptance of the offer before making any payments, and it would be advisable to keep copies of the letters. This method, if the creditors agree to accept the amounts offered, can finalise the situation, and allow the client to move on. Make sure the words ' Without Prejudice ' are put at the top of the letter.

Without Prejudice
Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed authority for your records. Enter a paragraph explaining personal circumstances for the financial difficulties. You may also need to give reasons for any high expenditure on the financial statement, especially if this relates to their illness We enclose a financial statement prepared with the client, using realistic figures, given their current circumstances. This also shows the level of debt outstanding. As you can see the client is finding it difficult to meet their basic needs. Thus at the present time we are unable to make a constructive suggestion as to how an offer of payment can be made. However a sum of .......... can be raised via a third party, (give details of third party and their relationship to you if possible) and this is being offered as an ex-gratia payment in full and final settlement of the account. I enclose a summary of the amounts being offered to each creditor. You would receive ......... This offer is made on the clear understanding that, if accepted, neither you nor any associate company will take any further action to enforce or pursue the debt in any way whatsoever and that you will release the client from liability. We also request that, if accepted, you will mark any entry on the credit reference file relating to the account as satisfied in full. If this proposal is acceptable to you I would be grateful if you would confirm this in writing, and enclose a payment slip so that we can make the payment without delay. I look forward to hearing from you soon. Yours faithfully Your Name Your Job Title Encs

Letter Six
Request a write off from a catalogue company.
In order for a creditor to take action in a court to recover a debt in court they need to be able to produce an executed copy of the Consumer Credit Act agreement. Catalogue companies generally never ask clients to sign any agreements, and thus this letter points out that legal action cannot be taken. Dear Sir/Madam

Re: (provide name address and reference number if known)


We are currently assisting the above client with their finances, and enclose a signed authority for your records. Enter a paragraph explaining client's personal circumstances for financial difficulties. You may also need to give explanations for any high expenditure

difficulties. You may also need to give explanations for any high expenditure especially if this relates to their illness. We understand from our client that you are pursuing them for payment of a debt. We have prepared a financial statement, which is enclosed. As you can see the client is finding it difficult to meet even their basic needs. The position now, and for the foreseeable future, appears bleak with circumstances very unlikely to improve. Highlight how the debt is impacting on their illness. We are thus requesting that you consider writing off the outstanding debt. We also understand from our client that he/she has never signed an agreement with you to cover this debt. As you will be aware it is a requirement of the Consumer Credit Act (sections 60 & 61) that any agreement is set out in a particular format, and is signed. If you are unable to produce signed documentation, the agreement would be unexecuted and therefore unenforceable in court. If you have the required documentation, we ask that this is produced. Your agreement to write off the debt would greatly relieve some of the stress and anxiety that the simple existence of the debt is causing the client, who cannot foresee a time when they will be in a position to pay. We ask that you give this request your most sympathetic consideration, and thank you for your attention to this request. We look forward to hearing from you. Yours faithfully Your Name Your Job Title Encs

Letter A
Offer of a pro-rata payment.
This letter is designed to be used by a debtor who wishes to write to a creditor. See notes on letter four for further details. Dear Sir/Madam

Re: your reference :


Since making the above agreement with you, my circumstances have changed. I am unable to afford the agreed monthly repayments at the present time. This is due to ........ give details of your personal circumstances which have led to the problems e.g. losing a job, income reduced, relationship breakdown, ill health etc. I enclose a personal budget sheet which shows my present financial position. As you can see I have only ........... left to pay my credit commitments. The offers I am making have been worked out on a pro-rata basis, and I am asking all creditors to accept lower payments. I am able to offer you a payment of ........ per month/week. I would also ask that you consider freezing interest and charges so that any payments I make will be utilized to reduce the debt in full. I hope you will give consideration to my personal circumstances, and of course if my circumstances do improve I will contact you again.

If you are agreeable to my offer, I would be grateful if you would send me a payment book/standing order/direct debit form (delete as appropriate) to make it easier to pay you. I would like to start the payments as soon as possible, so I would be grateful for a reply at your earliest convenience. Yours faithfully

Letter B
Offer of token payments.
This letter is designed to be used by a debtor who wishes to write to a creditor. See notes on letter two for further details. Dear Sir/Madam

Re: your reference :


Since making the above agreement with you, my circumstances have changed. I am unable to afford the agreed monthly repayments at the present time. This is due to ........ give details of your personal circumstances which have led to the problems e.g. losing a job, income reduced, relationship breakdown, ill health etc. I enclose a personal budget sheet which shows my present financial position. As you can see I have no money left to pay my credit commitments. I view of my circumstances I ask that you accept a token offer of 1 per month to be reviewed in six months. I would also ask that you consider freezing interest and charges so that the debt does not increase further. In order that I can make these payments easily, please forward a payment book/standing order/direct debit form (delete as appropriate) I hope you will give kind consideration to my personal circumstances, and of course if my circumstances do improve I will contact you again. I thank you for your attention to this matter, and I look forward to hearing from you soon. Yours faithfully

Letter C
Unable to offer a payment.
This letter is designed to be used by a debtor who wishes to write to a creditor. See notes on letter one for further details. Dear Sir/Madam

Re: your reference :


Since making the above agreement with you, my circumstances have changed. I am

unable to afford the agreed monthly repayments at the present time. This is due to ........ give details of your personal circumstances which have led to the problems e.g. losing a job, income reduced, relationship breakdown, ill health etc. I enclose a personal budget sheet which shows my present financial position. As you can see I have no money left to pay my credit commitments. At the moment I do not have enough to meet even my basic needs. I view of my circumstances I ask that you allow me to cease payments for a period of six months. I would also ask that you consider freezing interest and charges so that the debt does not increase further. If your circumstances are likely to be better in near future give details here e.g. will be possibly back in work in 6 months etc. I hope you will give kind consideration to my personal circumstances, and of course if my circumstances do improve I will contact you again immediately. I thank you for your attention to this matter, and I look forward to hearing from you soon. Yours faithfully

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