What is the creditor reaction to debt management solutions?

It’s well known that many people who are struggling with high debt levels delay taking the right debt advice. There are many reasons for this. However one often used is the fear of how creditors will react when it becomes clear the full debt payments can and will no longer be made.

Trust Deed website, Trust-Deed.co.uk, recently conducted a survey which asked how creditors had reacted to the news that a debt solution was in place. 74% of the survey respondents, many of whom have been struggling with very serious debt problems, said their creditor’s reaction was “OK”, or better, when they began to deal with their debt issues.

Worry about creditor reaction unfounded

These statistics might be interpreted to demonstrate that worry about creditor reaction is unfounded and therefore should not prevent any individual from dealing with their debts at the first possible opportunity.

Lenders understand that when they lend to the public a percentage of the debts will end up not being repaid. Primarily this is due to unforeseen changes in people’s circumstances.

They also understand that debt solutions, such as a debt management plan or individual voluntary arrangement assist them in collecting a proportion of the debt owed.

Operating debt collection departments and using solicitors is an expensive and often ineffective business for creditors. As such accepting money paid through a sensible debt management solution is generally a much more cost effective solution for them.

Creditor pressure to repay debt in full

Of course we have all heard the nightmare stories of individuals being harassed by creditors who are seeking the full repayment of their debts.

Some more unscrupulous lenders use frightening pressurising techniques which can cause individuals great stress and alarm. However, it should be pointed out that the vast majority of creditors do not do this.

Most lenders tend to be member of associations that bind them to dealing with individuals who can no longer fully repay their debts in a fair and responsible way. “The Lending Code” is an example of the commitment to fairness made by some banks and credit card companies.

The experience of many debt advisers is that banks and credit card companies are sometimes only pressurising their non-paying clients because they have no idea of their personal debt problems. A lender that hasn’t been paid will automatically call and write letters seeking repayment.

Communication with creditors vital

The intervention of a debt adviser allows full information about an individual’s financial circumstances to be communicated to lenders, along with details of the amounts which can be paid, and when.

Lenders will assess the information and decide whether the debt solution proposed makes commercial sense to them; they will then duly accept or refuse.

Direct contact with the debtor (by phone, text or letter) will tend to reduce significantly, though not always immediately as the lender has to first update their systems to include and consider the new information.

If you are suffering with a serious debt problem, your overall debt will tend to increase while you struggle to try and manage the problem yourself. For this reason it is sensible to take advice about a debt management solution as soon as possible.

Generally speaking creditors will welcome your actions as it shows that you recognise that you have a debt problem and are taking sensible actions to resolve it.

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