“The amount UK consumers owe on loans and credit cards grew by £1.9bn in March 2016, the highest figure in 11 years, driven by a sharp rise in spending on plastic.” (The Guardian)
If personal debt really is increasing again at a worrying rate, then a growing number of people could soon be facing the stress of a debt crisis.
For anyone facing this kind of problem, debt advisers might say things like this:
- Don’t ignore the situation. Open the demand letters, make a list of the balances.
- Always respond to every communication from a creditor. That shows you’re serious about dealing with the situation.
- Make an offer. Explain if you can’t offer more.
To those basic steps, I’d add another:
- Always communicate in writing. You’ll have a record of what was said and agreed; and it’s less stressful than dealing with creditors on the phone.
Avoid the phone
Many years ago I was in that situation, when my small business failed and I owed money to 26 creditors. Negotiating with all of them took a long time but eventually I came through it without permanent scars on my sanity (as far as I know).
I always negotiated in writing, never on the phone.
Dealing with a creditor on the telephone is stressful. My voicemail took a lot of the strain (what a great invention, whether you have an actual machine or a service from your phone provider) but if a creditor left a message I always responded … in writing.
One of the complications that I occasionally encountered was the involvement of intermediaries. Some were bogus law firms which were actually departments of the creditor company, with stationery designed to give the impression of being a genuine law firm, in order to intimidate.
When dealing with intermediaries of any kind, I was always extra-polite, working on the assumption that they hadn’t been fully informed, so I would write things like: “maybe you don’t know, but in the letter of so-and-so from your client …” and I’d enclose or attach a copy of the previous correspondence.
Not keen on writing letters? Help is available!
You might say that writing letters (or emails) is not your strong point. That’s no problem, because lots of debt management organisations can help you. For example, here in the UK, Citizens Advice Bureaux are all over the country and their advice is free and impartial. They helped me greatly. The other major nationwide debt advice charities are StepChange and National Debtline. There are also many local not-for-profit advice providers: for example in Bristol, where I live, there’s Talking Money. There’ll be one near you.
Buying time: it helps your negotiation
The other benefit of working with one of the debt advice charities, or any adviser, is that it creates a little distance between you and the creditor and it buys you some time. So, if a creditor calls you rejecting your offer and gives you a counter-proposal, you can say (politely, of course!) “thank you; but could you put that in writing, please, because I have to refer it to my advisers.”
Templates for standard letters / emails are available from some of the organisations I mentioned above. You can also find templates in my book Back to the Black.
Want to know more?
This article is an extract from my book Back to the Black … how to become debt-free and stay that way. http://amzn.to/2e9KOfG