When you draft your offer, there are a few things you will need to have at hand.
- A copy of your credit agreement or details of it:
- The account number;
- When it was taken out and how long it was due to last;
- What the monthly payments were;
- What the level of your arrears are.
- An income and expenditure for showing what you can afford to pay (you can use the Budget Planner below to help you do this).
You can take three approaches to making your proposal:
The Lump Sum Payment
This is where you say to the court you will make a lump sum payment by a certain date to clear off the arrears or the full amount outstanding. The Court may want to know what the source of funds for this payment will be, to judge the likelihood you will be able to fulfill you proposal.
Where you are not proposing to repay the full amount, the Court will expect you to begin making the normal contractual payments again until the lump sum payment is made.
The Court is not likely to allow a long delay between the hearing and when the lump sum will be made.
This is when you ask the Court for time to repay the arrears only.
So, for example if you had an agreement where you normally paid £100 per month, but had missed the last 5 month payments, you may offer to repay the arrears at £100 per month over 5 months, whilst also making the normal contractual payment of £100 per month. So you are paying £200 per month and once the 5 months are up, your arrears would be clear and you would continue with the normal £100 per month.
Total Amount Proposal
The final option is to just offer to repay the full amount owing. So you are requesting a Time Order until the full debt is repaid.
So if you owed £1,000, you may propose to repay the full amount over a period of 20 months at £50 per month (not including interest).
The difference between the Arrears Only Proposal and the Full Amount Proposal is the first is only until the arrears are clear (then you just resume your normal monthly payments); the second continues until the full debt is cleared.
The latter approach may be useful where you will not be able to resume the normal monthly payments.
How Long Should a Time Order Last?
How long a Time Order should last depends on how long it will take for you to repay the arrears or the full amount.
However, it is worth noting that the court will usually look more favorably on offers that propose to repay the total debt and arrears with the original time frame that was anticipated when the agreement was entered into.
So if it was an agreement taken out on January 2018 for three years and you should have repaid it all by January 2021, if your offer proposes to still do that, the Court will be more likely to accept your offer.
That is not to say the Court won't allow longer, but the longer you propose the less likely the Court will find your offer is reasonable.
What Other Information Can Help?
Other information can help the Court in deciding if your offer is reasonable, such as:
- Why you got into arrears (unemployment, relationship breakdown, ill health);
- What you have been doing to try and remedy the problem (have you tried to make offers to the creditors);
- What effect it will have on you if you are not granted a Time Order (will you lose your car and not be able to get to work);
- Are you now receiving money advice?