Tool · Letters to creditors
Can’t pay your debts? Offer £1 a month.
If nothing is left after rent, food and bills, you can offer each lender £1 a month and ask them to freeze the interest. The regulator’s own rulebook names it as a way lenders should help. This free tool writes the letters and the budget that backs them, and walks you through the next 30 days.
The reading says when £1 is the wrong letter, and what to do on each of the next 30 days.
Why £1 works
what the rules say
A token payment is not a trick and it is not a loophole. It is a small monthly payment, usually £1 to each lender, made while you cannot afford more, and it is written into the rules lenders work under.
The regulator names it
The Financial Conduct Authority’s rulebook says a lender must treat a customer in financial difficulty with forbearance and due consideration. Its own examples include accepting token payments for a reasonable period, and suspending interest and charges when the debt would otherwise keep rising.
So you are not asking a favour. You are asking a lender to do what its regulator expects, and the letter says so, with the rule numbers: CONC 7.3.4 and 7.3.5. A lender can still say no. It then has to justify that to you and, if you complain, to the Financial Ombudsman Service.
It puts you on the record
A lender that hears nothing assumes the worst and chases harder. A lender holding your budget, your offer and a payment every month is dealing with someone doing everything they can, in writing.
That record matters later. Before a lender can take you to court it must follow a court protocol that expects it to try to agree payments you can afford. Your letters are the proof that you offered.
What it costs you
£1 is less than your agreement says, so the account falls into arrears and, usually after three to six months, into default. A default stays on your credit file for six years from its date, whether or not the debt is paid by then.
£1 does not clear the debt, and each payment restarts the six years a lender has to take it to court. It is a way through a bad stretch, with the interest frozen, not a way out of the debt.
When £1 is the wrong letter
check these first
The £1 letter is for cards, loans, overdrafts, catalogues and buy now, pay later, when nothing is left after essentials. Sent to the wrong debt, or in the wrong situation, it can cost you. Check these before you write.
- Rent, mortgage, council tax, energy, court fines, child maintenance and taxThese are priority debts. The people you owe can evict you, cut off your supply, send bailiffs or, for a few of these debts, ask a court to send you to prison. Never offer them £1. Pay them first, and put what you pay in your budget.
- Car finance, hire purchase and logbook loansFall behind and the lender can take the car or the goods back. If you need them, treat the payments as a priority and keep them in your budget.
- You have money left after essentialsA lender reads your offer beside your statement. If the statement shows £150 spare and the letter offers £1, expect a no. The fair share letter splits what is left between your lenders, and the tool works the shares out.
- A debt you have not paid, or written about, for nearly six yearsIt may be about to become too old for a court to enforce. A payment, or a letter that admits the debt, starts the six years again. Speak to a free debt adviser before you send anything. The “Make them prove the debt” letter is worded to admit nothing.
- Court papers, or a judgment already madeA county court claim form comes with its own reply forms and a deadline, usually 14 days. These letters do not answer it. Ring National Debtline the day it arrives.
- You bank with a lender you oweA bank can take money from your current account to pay a card, loan or overdraft you owe to the same bank. Before you send anything, open a basic account with a bank you owe nothing to, and have your wages or benefits paid there.
- A joint debt, or one somebody guaranteedWhen you pay £1, the lender can ask the other person, or the guarantor, for the whole balance. Tell them before you write.
- Benefit overpayments and student loansThey are collected under their own rules, often straight from your pay or your benefits. These letters do not fit them.
- The debts of a limited companyThey belong to the company, not to you, unless you signed a personal guarantee, and the directors of a company that cannot pay its debts have duties of their own. Do not use these letters for them. That is something we can help with: send us a message.
- You live in Scotland or Northern IrelandThe time limits, the courts and the schemes are different there. This page and its letters are written for England and Wales.
The next 30 days
what to do, in order
The letters work as part of a plan. This is the order to do things in, from the day you decide to deal with it.
- Today: move your money out of reachIf your wages or benefits are paid into a bank you owe money to, open a basic account with a different bank and have them paid there. A bank can take what is in your account to pay what you owe it.
- Today: list every debtWho you owe, the reference on their latest letter, the balance, and whether it is a priority debt. Rent, mortgage, council tax, energy, fines and tax always come first, and go in your budget.
- Today: send the 30-day letterOne to each card, loan, overdraft and catalogue lender. It asks them to stop chasing and freeze the interest while you work your figures out. Choose “Ask for 30 days first” in the tool at the foot of this page.
- Days 2 to 7: do your budgetFrom three months of bank statements. The tool turns weekly and yearly amounts into monthly ones and adds them up. What is left at the bottom decides which letter goes next.
- Day 7: write to every lender on the same dayNothing left: the £1 letter. Something left: the fair share letter. Each goes with a signed copy of your statement. Ask the Post Office for free proof of postage, and keep copies of it all.
- The same day: start payingSet up a standing order to each lender for what you offered, with your account number as the reference. Do not wait for a yes. Then cancel their direct debits, and any card they hold, through your own bank.
- Days 8 to 30: answer in writing, and only in writingA yes: keep the letter. A request for more information: send it. A no: keep paying, and send “They said no: ask again”. A phone call: say you have written, and end the call.
- When a default notice comesExpect one. It is the formal step a lender takes when payments fall below the agreement, and its date starts the six years the default stays on your credit file. Keep paying what you offered, and keep the notice.
- Day 30: check each lender offHas it agreed in writing? Has the interest stopped on your next statement? Send the offer again to any that has not answered. After eight weeks without an answer, send the complaint letter.
- A month before your offer runs outDo the budget again and write again: more if you can afford more, the same if you cannot. If nothing is going to change, ring one of the free advice services about a longer answer.
If they phone
you do not have to talk
You do not have to discuss your debts on the phone, and nothing said on a call is on the record. Lenders phone because it works for them: people on the spot agree to more than they can pay.
What to say
“I’m not able to talk about this by phone. I’ve written to you with my budget and my offer. Please reply in writing.”
If they press, say it once more, in these words, and end the call:
“I’m not agreeing to anything on this call. Please put it in a letter.”
What not to do
- Do not give a card number. A card on file lets a lender take payments when it chooses.
- Do not agree to an amount to get them off the line. A figure agreed on a call is the one they will hold you to.
- If you do not know who is calling, do not confirm your name, address or date of birth. Ask them to write.
- Note the date, the time and the number of every call. If the calls carry on, that note is your complaint.
Then send “Stop the phone calls”. The FCA’s rules tell a lender to respect a reasonable request about how you are contacted (CONC 7.9.4).
If they say no
a refusal is not the end
A first refusal is often a standard letter, sent before anyone has read your budget. It changes nothing about what you can afford. This is what to do with it.
Step 1: Keep paying
Pay what you offered, on the same day every month, whatever the reply says. Every payment is evidence that you are doing what you said you would.
Step 2: Ask again, in writing
Send “They said no: ask again” with your statement. It names the rules, says you are still paying, and asks for a second refusal to be treated as a complaint.
Step 3: Go to the Ombudsman
A lender has eight weeks to give its final answer to a complaint. If it has not put things right, the Financial Ombudsman Service will look at it, free, and can tell a lender to put things right.
The Financial Ombudsman Service is on 0800 023 4567 and at financial-ombudsman.org.uk. You have six months from the lender’s final answer to go to it.
What a lender can do while you pay £1
- Keep writing to you.
- Keep adding interest and charges until it agrees to stop. If it does, complain.
- Record a default, and pass or sell the debt to a collector.
- In the end, start a court claim. It must first send a formal letter of claim, which gives you 30 days to reply with your budget.
What it cannot do
- Send bailiffs. Only a court can, after a judgment that you have then not paid.
- Come into your home. A debt collector is not a bailiff and has no more power than the lender.
- Take money from your wages without a court order.
- Tell your employer, your family or your neighbours about the debt.
- Add charges your agreement does not allow.
When the debt is sold
what changes, and what does not
Lenders sell debts that are in default to debt purchasers, for a fraction of the balance. It need not be bad news, if you know what changes and what does not.
What changes
You will get a notice of assignment, usually one letter from the old lender and one from the new owner. From then on you pay the new owner.
Move your standing order, and send the new owner your £1 letter and statement afresh, with its own reference on them.
What does not change
The buyer steps into the lender’s shoes: the same agreement, the same balance, the same FCA rules. It cannot add charges the agreement did not allow.
The date of the default stays the same, and so does the six-year clock. Neither starts again because the debt was sold. If a new, later default appears on your credit file, complain.
Make them prove it
Paperwork goes missing when debts are sold. “Make them prove the debt” asks the buyer for a copy of the credit agreement and a statement of the account under the Consumer Credit Act, for a £1 fee.
It has 12 working days. Until it sends them, it cannot ask a court to enforce the agreement. The debt still exists, and it may still write to you. The letter admits nothing, so it can go before any offer.
Settling for less
A buyer that paid a fraction of the balance can accept less than the balance and still come out ahead, and many do. If you can raise a lump sum without borrowing, “Offer one payment to settle” makes the offer and sets the conditions.
There is no going rate, whatever you read: offer what you have. Pay nothing until you hold a written yes, and keep that letter for good.
Free debt advice
you don’t have to work this out alone
£1 a month holds a debt still. If nothing is going to change in the next year, there are ways to end a debt rather than pause it: a debt relief order, bankruptcy, an individual voluntary arrangement or a debt management plan. Which one fits depends on what you owe, own and earn, and only a regulated debt adviser can tell you. These services are free, confidential and independent.
National Debtline
Free debt advice by phone and webchat, run by the Money Advice Trust charity. Good for talking a budget through with an adviser.
StepChange
A debt charity offering advice online and by phone, and able to set up and run a repayment plan for you at no charge. If you are self-employed, it will refer you to Business Debtline.
Citizens Advice
Advice on debt, benefits and housing together, online, through its debt helpline or face to face at your local office.
MoneyHelper
The government-backed money guidance service. Its debt advice locator finds free advisers near you, including ones who can apply for Breathing Space: up to 60 days’ legal protection from most creditors, which only a debt adviser can apply for.
Business Debtline
The same charity as National Debtline, for the self-employed and small business owners whose business and personal debts are tangled together.
Owe tax to HMRC?
Don’t use these letters for a tax bill. HMRC can often agree a payment plan that spreads the cost, known as Time to Pay. That is something we can help with: working out what you can afford and talking to HMRC with you.
Questions
good to know before you send
Is offering £1 a month allowed?
Yes. You are telling a lender what you can afford and asking it to accept that, which is what the FCA’s rules expect a lender to consider. What you must not do is offer £1 when your budget shows you could pay more: the statement you sign has to be true.
Do my lenders have to agree?
No. The FCA’s rules say a lender must show forbearance, and give token payments and frozen interest as examples of it. They do not say a lender must accept your offer. Most will agree to something reasonable that is backed by an honest budget.
If one says no, keep paying what you offered and send “They said no: ask again”. Don’t agree to pay more than your budget shows you can afford.
Will this affect my credit file?
Yes. Paying less than your credit agreement says is recorded as arrears or as a payment arrangement, and after several months the account is normally marked as in default, which stays on your file for six years. It will be harder to borrow for a while. Falling further behind without telling anyone usually does more damage.
What if I miss the £1?
Don’t. It is the cheapest proof there is that you are keeping your word, and a missed payment gives a lender its easiest reason to say the arrangement has failed. A standing order for the day after your income arrives pays it for you.
How should I send the letters?
By post: sign each letter, enclose a signed copy of your statement and ask the Post Office for free proof of postage. Many lenders also accept letters by email or through the secure messages in their app or website. Use “Copy this letter as text” to paste the wording in, and attach your statement as a PDF.
Whichever you choose, keep a copy of everything you send and a note of the date.
A debt collector is chasing me. Who do I write to?
Write to whoever is asking you for payment now. If a collection agency is collecting for the original lender, or has bought the debt, send the letter to the agency and quote the reference on its letters. A debt collector has no more power than the original lender, and the same letters work for both.
The debt is in joint names. What changes?
With a joint debt, each of you is responsible for the whole amount, not half each. Tick “This debt is in joint names” for that creditor and the letter is written from both of you, with both names on it. Both of you should sign.
What happens to the information I type in?
It stays on your device. The tool runs entirely in your browser: nothing you type is sent to us or to anyone else, and we can’t see it. Nothing is kept either: it is gone when you close or leave the page, so print your letters or save them as a PDF before you go. Our privacy notice has the detail.
Is this debt advice?
No. We are accountants, and this page gives you standard letters, the rules they rely on and the arithmetic. It can’t weigh up your circumstances or tell you whether a token payment, a repayment plan or something else is right for you. The free services above can, and it is worth a call before you send anything.
Where we can help directly is with tax debts, with getting your books and self-employed income figures straight for your budget, and with the finances of a business that is struggling.
Your letters
nothing you type leaves this page
This is where you write them. Four steps, about twenty minutes. Have three months of bank statements, your household bills and the latest letter from each lender to hand. You fill the letters in on screen, then print them or save them as a PDF. Each one names the rule it relies on.
Step 1Which letter do you need?
If nothing is left once rent, food and bills are paid, start with £1 a month. If you have not done your budget yet, send the 30-day letter today and come back for the £1 letter. You can change letter at any time without losing what you have typed.
To pay less, or to buy time
To hold a lender to the rules
Choose a letter and the other three steps open.
Nothing you type here leaves this page, and nothing is kept: it is gone when you close or leave the page. Print your letters or save them as a PDF before you go.
Free to use, with no sign-up. This tool gives you standard letters and adds up your figures. It is general information, not debt advice, and it can’t tell you which course is right for you. We are accountants, not debt advisers: for advice about your own situation, use one of the free services above.
Business under pressure? Talk to us early.
If you are behind with HMRC, unsure what your business is really earning or worried about what comes next, a conversation costs nothing. We’ll help you see where you stand, without judgement.