Negotiated Agreement
with Creditors
Learn more about a negotiated
agreement with creditors
What is a negotiated agreement with creditors?
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:
- Payments from your income
- 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.
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.
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 for a limited period.
Benefits and Considerations of an negotiated agreement
Benefits of an negotiated agreement
- Fair way of sharing payments that is widely understood by creditors
- You can ask your creditors to accept reduced payments if your situation worsens or you face some unexpected essential spending
- You do not need an advice agency to negotiate with your creditors and can do it yourself. You can create your own budget and make offers to creditors based on this. If you wish you can ask an advice agency to help you with budgeting
- Creditors may be prepared to write off the balance of what is owed if you have shown commitment to repay as much as you can and have maintained regular payments
- There is no fee to pay
Considerations of a negotiated agreement
- Creditors may refuse to agree with your offer but they can’t refuse any payments you make to them
- Creditors may refuse your offer unless it is made through an advice agency that has independently reviewed your circumstances
- Creditors are able to take legal proceedings against you at any time. This can include continuing to obtain county court judgments, a third party debt order or a charging order against your property; even when you are making every effort to pay
- Having a charging order on your home means that if you don’t repay the debt the creditor has a claim on the proceeds if the property is sold
- If you can only afford small payments these may not be enough to cover the interest and charges and your debts will continue to increase
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Service you can trust
We pride ourselves on delivering the highest level of service to help people find a solution to overcome problem debt.
Read real reviews of our service on Trustpilot and Feefo.
Start your journey today and see which solution suits your needs.
Speak to a debt help expert now on 0161 823 4974 or complete the form and we will call you back.
They have been so helpful and understanding best thing I did. Excellent worth every star
D White, Feefo
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Our initial advice is provided free of charge and there is no obligation to proceed with our recommendations. All financial solutions are subject to eligibility and acceptance and depending on your chosen solution. UK Debt Service specialises in Individual Voluntary Arrangements (IVAs), but this may not be suitable in all circumstances. If you choose to proceed with an IVA fees apply and your credit rating may be affected.
Free debt counselling, debt adjusting and providing of credit information services is available. You can find out more by contacting Money Helper.
Free debt counselling, debt adjusting and providing of credit information services is available. You can find out more by contacting Money Helper.