According to the law, when a consumer faces financial as well as a health crisis and is unable to keep up with the monthly payments, the debt can be reduced by the creditors. If you know about the industry guidelines and codes of practice, then you can ask your creditors to reduce your debts and sometimes even write it off if you can prove that you are:
- Very unwell and undergoing medical treatment
- Unlikely to recover fully in the near future and
- Have no other sources to repay the debt.
If you feel that these conditions apply to you, then you may successfully have your debts settled or written off. However, according to the requirements of the law:
- You will have to do this in writing.
- In addition to that, you may also require some medical evidence.
- A letter from your doctor to substantiate your health condition.
For this, you can ask your general physician or a psychiatrist or even any health care professional to help you out with the medical evidence. Moreover, you may also need to attach your budget sheet just to show that you cannot afford to repay your debts anymore.
This is a very useful approach in which you will be provided with some breathing room and scope for repaying the debt as per the new terms agreed by the two parties, provided you opt for debt settlement. Therefore, most of the consumers consider this to be the most viable way to get rid of their debts.
However, more often than not consumers do not realize the consequences of debt settlement both in the short term as well as in the long term basis. It needs a careful and strategic approach and considering a few pints and factors.
If you too are facing the same situation and want to settle your debts due to health reasons, there are a few things to know which will help you to go about the process with a lot more confidence.
Debts to consider
While negotiating with your creditors for reduced payments to your debts if you cannot afford the normal monthly payments, the first thing you need to consider is the amount that you will be able to pay each month. Remember, once an amount is negotiated and finalize there will be no recourse or further reduction in the amount or there will be no scope for making any alterations to the new agreement either. It is for this reason you are advised to go through the debt settlement reviews to know about the pros and cons of it before you sit across the table with your creditor or creditors. The best way to deduce an amount that you can afford is by prioritizing your debts.
- Look for your priority debts first to repay. You can seek help from a debt adviser in these regards if you already have any priority arrears because these debts can be urgent and more consequential. You will need to formulate a budget sheet so that you can know the exact amount you can offer your creditor as your new monthly payment and probably a bit more to pay off the arrears, provided you have the money available as per your new budget.
- Then look for the non-priority debts once you have come to terms with your priority creditors. Seeing at how much money is left in your hand for the non-priority debts, make a sensible offer to all of your creditors to pay their dues back with an amount you can afford every month for the entire new tenure.
The best way to do this is to split the leftover money on a pro-rata basis. This means making the highest offer to the creditor you owe the most money and the lowest offer to the creditor whom you owe the least. Once again the money advisor will help you out in this matter. If very little money is left after paying your priority debts, you can even make a token payment to your non-priority creditors. This will show your intent to repay the loan.
Making the offer
When you make the offer make sure that you follow the specific steps as under:
- Make all offers to your creditors in writing and get it signed when an agreement is reached
- Ask them to freeze any charges and interests due on these agreed loan accounts
- Send them a copy of your budget sheet
- Retain a copy of each of the letters you sent and file it properly in case you need them in future.
The creditors may not always accept your offer when you self-negotiate for debt settlement but they can never refuse the amount that you send in. continue making payments and write them asking to reconsider.
Mental health conditions
Always tell your creditors about your mental health as that will help a lot. Creditors will then have to follow the guidelines as set to deal with customers living with mental conditions. In such cases the creditors can make the following adjustments:
- Moving your account to a team specialized in awareness of mental illness
- Communicating with you in a more appropriate way at a suitable time for you
- Placing your account on hold and
- Agreeing to write off a part or all of the debt.
However, the creditors will need some specific information as follows to provide you with such facilities:
- Details of your health condition
- How long you have been affected and
- A proper explanation of how your health condition has affected your money management ability.
There is a Debt and Mental Health Evidence Form or DMHEF designed by The Money Advice Liaison Group that you or your debt will need to fill up as well. The information will be used to deal with your account. However, the creditor is not allowed to share this information with other organizations.
Creditors may agree to write off debts, reduce it, term it as non-collectible and not contact you at all and few may even contact to know your current financial situation.