CALCULATING & MAKING OFFERS TO NON-PRIORITIES

When you have included all your income you will need to work out your expenditure with your family if necessary and include any payments to priority creditors for arrears (these should have already been agreed). You will need to be realistic in the amounts you put down as creditors may ask you to explain in some cases.

Once you have completed and agreed your income and expenditure form including payments to your priority creditors you will then be in a position to calculate the amount available (if any) for your non-priority creditors. (There is an automatic calculator on our website at www.invernesscab.org.uk

This calculation will be based on any surplus income available (if any) after your total expenditure is taken away from your total income. If you have any surplus or disposable income available you will then be in a position to make a pro-rata offer to your non-priority creditors. This basically means that your surplus income is divided proportionately between creditors.

Example:

If you owe a total of £10,000 to 5 different creditors, and you have £100 per month surplus income. You will now have to calculate pro-rata payments to non-priority creditors using the following formula.

Debt to creditor divided by total debt times total surplus = offer to creditor

Examples below

Creditor Debt Monthly Offer Calculation
Any Loan Ltd £5,000 *£50 Any Loan Ltd
Any Card Ltd £2,000 £20 £5,000 divided by £10,000 (total debt)
multiplied by £100 (surplus)
= *£50 offer
Catalogue Ltd £1,500 £15
Any Finance £1,000 £10
Any Cards £500 £5


The above is just an example. You may have fewer or many more non priority creditors and would therefore need to repeat this calculation depending on the number of creditors.

If you do not have any disposable income (this is often the case) we would advise you make monthly token offers (possibly £1) to your non-priority creditors as this would show goodwill. In some circumstances it may be worth asking creditors to write off your debts (token offer and write off letters included). If you require further advice on token offers or write offs please contact the Bureau.

NOTIFYING NON-PRIORITY CREDITORS OF YOUR OFFER


Step 6: When you have completed all pro-rata offer calculations for your non-priority creditors or wish to make token offers you will need to write to them with your offer (including a copy of your Financial Statement). We have included blank offer letters (please take copies as required) with this pack for you to fill in your creditor details and send. You should keep a record of these offer letters for future reference on the creditor check lists provided.

CREDITOR ACCEPTANCE


Step 7: When a creditor confirms acceptance of your offer you should make and maintain payments as agreed and again you should record this on your creditor checklist. If a creditor does not accept your offer we would still advise you make payments as offered if possible.

Unfortunately it is common practice for some creditors to reject offers and continually pass accounts round collection departments and external collection agencies. Where this happens don't panic just send a copy of your Financial Statement / Offer on to which ever department or collection agency takes over your account and then payment if possible.

Please note some collection agencies and departments can persist in making calls and demands, however you should stick to your offers. There are laws regarding harassment and there are agencies you may be able to complain to regarding these practices, please contact the Bureau for further information if necessary.

There are a number of fact sheets available on our web site (www.invernesscab.org.uk) which you can download. These include one specifically on harassment.

Useful Contacts

Office of Fair Trading (OFT) 0845 722 4499
www.oft.gov.uk

Financial Ombudsman Service 0845 080 1800
www.financial-ombudsman.org.uk

Banking Code 0845 230 969
www.bankingcode.org.uk

CREDITOR PAYMENT REVIEWS


Creditors usually agree payment plans for set periods for example 3, 6 or even 12 months then ask for a review of your financial circumstances. When this happens, you could contact the creditor by telephone or send an up to date Financial Statement if requested.

Alternatively if your circumstances deteriorate or indeed improve you should draft a revised Financial Statement showing your re-calculations / offers.

If any of your creditors take legal action to recover their debt, don’t panic. You will need to check the details before completing and returning any relevant forms within the specified time.

Useful Link

http://www.scotcourts.gov.uk/

There are a number of fact sheets available on this website (www.adviceguide.org.uk) which you can download. Alternatively, you can contact the bureau for further advice.

DOCUMENTS / LETTERS / TELEPHONE CALLS


You are likely to send and receive a number of letters and documents, and make and receive phone calls relating to your debts and creditors. We would strongly advise you record these on your creditor checklists where relevant and keep all letters, notes of phone calls and records of payments safe (in a file if possible). All this information is important and could be useful for future reference.

REMEMBER


CAB Debt Management Plan is completely free with any payments you make going to your creditors in full. There are no start up costs or fees to pay and we do not receive any funding, commission or contributions from creditors out of your payments unlike some “Free” Debt Management & Advice Businesses.

HELPING YOURSELF


Taking the above into account, we would advise you to take the time to read and learn about finance and debt (including using this guide), as they are now part of everyday life. Understanding the issues and your legal rights can put you in a strong position when dealing and negotiating with creditors or their agents and could save you a considerable amount of money.

Do not be afraid, it may not be as difficult as you think and remember that the more you know, the more confident you may become which in turn may help you take control of your finances.

Please contact the bureau if you require further advice and/or assistance relating to this guide.

Next: Creditor Checklists