How to Get Out of Debt Part 3

Did you manage to read Part 1 and Part 2 on How to Get Out of Debt before landing on this page?

Step 7 Negotiate With Secondary Creditors


After agreeing offers with all your priority creditors, your financial statement should be updated to see if you have any disposable income to pay your non priority debts. The fairest way to divide this amount (if any) amongst your secondary creditors is in proportion to the total amount they are owed.

List these amounts on a summary sheet and add up the total of the secondary debts. The total available disposable income is then appointed to these creditors by the following method:

Individual debt   x Disposable income = Offer

Total Debts

The example given below assumes you have £100 disposable Income per month available for all secondary creditors.

Schedule of Secondary Creditors


Name:                   Date:



£                                              £

Toy Catalogue         2,000                                       20.00

Western Loans          3,000                                        30.00

Easy Car Finance       1,000                                      10.00

Flexi Credit Card       4,000                                       40.00


Total                              10,000                                     100.00

Using the above formula the calculation for the Flexi Credit Card would be:

£4,000   x £100.00   = £40.00


Using the figures you have calculated you can now make an offer to each of your secondary Creditors. An example letter can be downloaded from here and this should be supported with a copy of your debt schedule and also your financial statement.

It is important that creditors can see that you have treated each of them fairly so don’t feel pressurised or threatened into increasing individual offers at the expense of other creditors. There is usually a reluctance to freeze interest and other charges but there is little point of paying if the outstanding balance continues to grow so try writing again using the following template.

If your bank is a secondary creditor it may be necessary to move to another bank and open a new account if possible and even redirect your wages, so that you can have access to them. Direct debits will also need to be transferred as the bank may stop paying them.

Start payments as soon as they are agreed in writing with your creditors and remember that keeping up payments are essential, even if they are small.

If your circumstances deteriorate further and you cannot sustain payments then prepare a revised financial statement, re-calculate your offers in line with your current available disposable income and write to your creditors again explaining the change in your circumstances. If a creditor will not accept your initial offer you can send them another letter downloadable here

Often creditors will agree to reduced payments for a limited period of time, for example 3-6 months. If your circumstances haven’t improved by the end of the agreed period let them know this in the first instance, and continue existing payments. Otherwise prepare a revised financial statement and re-calculate your offers as discussed previously.

If you have no disposable income for secondary creditors then write to them to inform explaining your circumstances and sending your financial statement to  confirm your situation. Agree to contact them as soon as your financial situation starts to improve. In the mean time ask them to freeze interest charges or consider writing off the debt or accepting a reduced settlement, although they are unlikely to do so in the early stages. Make a token offer of payment to each creditor of £1 per month. Include the first payment with the letter and continue to make monthly payments. This shows that you want to do what you can to pay what is due. Again here is another downloadable letter template you can use.



The path to clearing your debts, or even avoiding them, may be quite short for some. On the other hand, you could be faced with several years of hardship before you are able to clear them. In either case you need to identify the cause of your problem. Most people fall into debt through no fault of their own. It is often as a result of redundancy or reduced working hours, illness or marriage breakdown. However, it may be that you found using credit cards was too easy or you were unable to resist offers of interest-free credit.

One of the key things to remember is that family pressures will arise. Not only will you have less money, but your stress and anxiety levels are likely to increase. It is important to realise that this is perfectly natural and understandable so please don’t be afraid to seek help and medical advice if necessary. If you have lost your job, try to keep yourself occupied. You might find it helpful to join a local support group if there is one in your area.

Below are a few practical suggestions for saving money and staying out of debt in the future:

  • Only buy on a cash basis – you can’t afford something save up for it.
  • When you go to buy something ask yourself whether you really need it or just want it.
  • Try waiting for thirty days before you buy anything and if you decide you are going to buy it try to obtain one or two quotations to compare prices.
  • When you go shopping prepare a list and keep
    to it.
  • Make a financial statement before you are in debt.
  • Look for ways to improve your income whilst trying to reduce your expenditure.
  • Keep your own accounts and always check your bank statement.
  • Budget for non-regular bills and expenses. By paying some bills, for example gas and electricity, by direct debit you automatically receive a small discount.
  • Educate all members of your family in managing their own finances – you could be preventing much heartache in future years.
  • Start a regular savings plan – no matter how
    small the amount.

Remember – if debts start to build up again seek immediate help before things get too far out of hand.

Some Do’s and Dont’s

DO be realistic – face up to your true situation and resolve to deal with it – using the help available to you.

DO get in touch with your creditors immediately to explain your difficulties.

DO give priority to those debts which may result in you losing your home, fuel supplies or your liberty.

DO remember that your creditors prefer small payments regularly rather than larger, irregular payments that you cannot sustain.

DO reply to creditors’ letters and court documents within the time period specified and let them have all the facts.

DO keep copies of all correspondence, financial statements, debt schedules etc.

DO attend and/or be represented at court hearings and take all relevant correspondence with you, including your current financial statement.

DON’T ignore the problem – it won’t go away.

DON’T give up trying to reach agreement with your creditors even if they are difficult and refuse your initial offers.

DON’T be threatened or bullied into making promises which you cannot fulfil.

DON’T borrow more money to pay off your debts, especially by taking on more credit or store cards.

DON’T be afraid to ask for specialist advice – it’s free!

Useful Contact Details

Citizens Advice
The Citizens Advice service helps people resolve their legal, money and other problems by providing free information and advice and by influencing policy makers.

Community Legal Advice
Community Legal Advice is a free and confidential advice service paid for by legal aid.
0800 345 4 345

Consumer Credit Counselling Service (CCCS)
As a leading debt-counselling charity, CCCS provides free and confidential advice on debt issues.
0800 380 3390

Directgov is the website of the UK government for its citizens, providing information and online services for the public all in one place including benefits.

National Debt Line
Offers free debt counselling over the phone.
0808 808 4000

Shelter is a charity that works to alleviate the distress caused by homelessness and bad housing bt giving advice, information and advocacy to people in housing need.
0808 4444

The Bankruptcy Association
Offers help to all those considering or going through bankruptcy.
0153 469 474

Credit reference Agencies

Call Credit Check
To access your credit record and details of
your credit history.

For details of your credit history
0207 298 3000

For details of your credit history
0844 481 8000


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