Guidance Notes for Borrowers

Keeping in Touch With Your Lenders and Creditors

Our counsellor has helped you to identify your current debts.

You now need to contact each lender and creditor to whom you owe money, preferably in writing.
(see Sample Letter to Lenders and Creditors below).

Your letter should explain your current problems and offer a revised payment arrangement which you can afford.

In the case of unsecured loans and credit cards, ask your creditor to reduce or suspend interest charges. They may agree if it helps to reduce the debt.

Attend to the priority debts first as the penalties imposed for non-payment are severe and could affect the security of your family. (see Priority Debts below).

The Income and Expenditure Statement, which you completed with our counsellor, contains a useful check list and we will be happy to provide you with a copy on request.

Although some lenders and creditors may not accept your offer, you should still make the promised payments. This demonstrates a responsible attitude and will do most to preserve your future credit worthiness.


Sample Letter to Lenders and Creditors


(Lender's/Creditor's Address) (Your Address)
Dear Sir/Madam


I am writing to advise you that I have some financial difficulty. Having completed a statement of my income, expenditure and liabilities with the assistance of a Mortgage Arrears Counsellor appointed by my mortgage lender to enable me to prioritise my debts, I am writing to all of my lenders and creditors asking them to accept reduced payments.

Please would you accept a payment of per week/month towards my current arrears/debt? (In addition would you suspend any further interest charges so that my payments will start to reduce my debt*).

I look forward to hearing from you.

Yours faithfully

*Include this final sentence only for unsecured loans or credit cards.




Priority Debts

Borrowers who experience financial difficulty can sometimes be tempted to concentrate on those debts which require a smaller commitment, such as their credit cards, and ignore those which involve much larger payments such as their mortgage. You should not be tempted to adopt this policy if you are in difficulty meeting your commitments and running into arrears.

It is important that you identify your priority debts in relation to the severity of the final penalty for non-payment.

For mortgage arrears, including second mortgages and other loans secured against your home, your lender may ultimately take possession of your home and you and your family may be evicted - concentrate on this first.

For Income Tax, VAT, Council Tax (Community Charge), unpaid fines and maintenance arrears, you may ultimately be imprisoned and/or suffer distraint and/or the seizure of your personal properties.

Although these final penalties occur only after lengthy court proceedings, the consequences are severe and you should make every effort to avoid them.

For water, gas and electricity arrears you may be disconnected directly by the supplier of services without recourse to court proceedings.


County Court Procedures

If a lender or creditor takes court action against you, it is important that you attend any hearings. If you are worried, free advice is available from the local Citizens Advice Bureau or Law Centre.

These hearings take place in the County Court, which is not a criminal court and is there to ensure that justice is done between you and your lender or creditor.

The case will be heard by the District Judge in the presence of just you and your lender or creditor and will not attract publicity but will remain private.

Copies of correspondence between you and your lender or creditor should be made available to the court, along with your Income and Expenditure statement, which should help to justify your revised payment offer.