Step 4 negotiate with your creditors

Once you have identified your disposable income, the final step is to negotiate with your non-priority creditors. Remember, you should arrange to repay your priority debts before doing this.

Start by sending holding letters. Explain why you can’t maintain your monthly payments, mentioning your cancer or treatment if appropriate. You’ll then need to work out pro rata payments. This means dividing up your disposable income fairly to pay off at least some of the debt owed to each non-priority creditors. You can calculate this by:

Individual debt x total disposable income ÷ by total debt = payment arrangement for each creditor

Finally, send letters to your creditors offering monthly repayments at this rate. Make these offers on either a weekly or monthly basis. Include a copy of your financial statement to show how you reached your figure.

If you have no disposable income, tell your creditor. Ask them to not take any further action on your account, including further interest and charges, for 3–6 months. It may also help to get specialist advice from a free debt advice agency.

Making deals with your creditors

If you have identified your priority debts and created a financial statement, you should now be ready to make a deal with your non-priority creditors.

Some organisations can help you negotiate with creditors. Remember, you should arrange to repay your priority debts before making any offers to non-priority creditors.

If you have any disposable income based on the financial statement you completed (disposable income is income minus expenditure), you can start to follow the procedures below:

  1. Send holding letters to all non-priority creditors (see sample letter 1 [Doc, 32kb]).
  2. Work out pro rata payments to creditors based on the disposable income you have.
  3. Send offer letters with pro rata offers to non-priority creditors (see sample letter 2 [Doc, 24kb]).


Pro rata payments

Pro rata is an amount that is in proportion to the debt you have with each individual creditor.

The way you would calculate a pro rata offer to your creditors is as follows:

Individual debt x total disposable income ÷ by total debt = payment arrangement for each creditor.

Disposable income should have been worked out on either a weekly or monthly basis, and offers should be made on the same basis.

Example of calculating a pro rata payment

In total, Linda’s non-priority debts from credit cards and unsecured loans add up to £20,000. After she has paid her essential living expenses, her mortgage and outstanding taxes (priority debts), Linda has £100 a month left over.

She wants to divide this up fairly to pay off at least some of the debt owed to her non-priority creditors.

Here is how Linda worked out a fair payment offer for a loan for which she still owes £3,500:

£3,500 owed to an individual creditor x £100 disposable income per month ÷ £20,000 total debt = £17.50 per month payment offer

When she writes to the bank about her loan, Linda can include a copy of her financial statement and explain how she worked out the pro rata payment offer.


Offer letters

Include a copy of your financial statement with each offer letter, as this will demonstrate to creditors how you reached the offer figure. Start making any payment offer you’ve made and don’t wait until they reply. There are agencies like StepChange Debt Charity or National Debtline who will help you do this for free so that all the money you can afford goes to your creditors and not in fees.

Your financial statement will also show that you have no further disposable income available. You may find that once you have completed your financial statement you have no disposable income to offer your non-priority creditors. The next course of action would depend on your individual circumstances. You will need to assess when you or family members are likely to return to work and regain control of your finances. This will depend on any treatment and/or surgery that you’re likely to have and how long your treatment programme will last for.

You should contact your creditors and make them aware that you have no disposable income, and ask that they withhold any further action on your account for 3–6 months (see sample letter 3 [Doc, 28kb]). You’ll also need to request that your creditors don’t add any further interest or charges to your account during this period.

Not all creditors will accept this and they may press you for an offer of payment. In this case, write back to them. Explain that you’re treating all non-priority creditors the same and can’t offer them more than another. Tell them about other creditors who have already accepted this arrangement.

If you have terminal cancer and treatment isn’t an option, you may be able to discuss this with your creditors. At this stage, it may be a good idea to suggest to your creditors that they write the debt off immediately, as the possibility of your future earnings may be limited (see sample letter 4 [Doc, 25kb]).

Your creditors may never formally agree to write off a debt, but they may decide to take no further action.


Other debt strategies

If you’re unable to repay your debts in a reasonable amount of time, a repayment programme may not be appropriate.

If this is the case you should seek specialist advice from a free debt advice agency. Their advisers may suggest that you consider bankruptcy, a Debt Relief Order or an Individual Voluntary Arrangement (IVA) – an agreement between you and your creditors to pay all or part of your debts. These must be set up by an authorised debt specialist and there are costs involved. You can get advice about IVAs from your nearest Citizens Advice or StepChange Debt Charity.


Back to Managing debt and borrowing

Debt and borrowing overview

Living with cancer can bring extra expenses. Learn how to manage your debts using a clear step-by-step process.

Step 1: increase your income

Increasing your income is the first step to managing your debts. Check your entitlement to benefits and insurance payouts.

Step 2: Create a financial statement

Creating a simple financial statement will give you a clear idea of your disposable income.

Step 3: Identify your priority debts

Prioritise your debts to keep track of your financial commitments.