Informal Arrangements
The UK Insolvency Helpline guide to Informal Arrangements
This section will go into detail on the following areas:
- What is an informal arrangement?
- What are the Advantages and Benefits of an Informal Arrangement?
- What are the Disadvantages and side effects of an Informal Arrangement?
- Who are informal arrangements suitable for?
- What is the procedure to set up an informal arrangement?
- The key points to a successful Informal Arrangement?
What is an Informal Arrangement?
Where is not possible to enter into formal insolvency proceedings such as an Individual Voluntary Arrangement or a Bankruptcy order it is sometimes worth looking at an Informal Arrangement.
In the UK if you are in debt but your disposable income is very minimal, i.e. under £50 or even £100 you may need to consider a special non-governmental scheme called an informal arrangement.
An Informal arrangement is a short/long term arrangement developed by The UK Insolvency Helpline.
An informal arrangement is an agreed settlement with your creditors. Under the informal arrangement the person in debt agrees to pay a lower or reduced level back.
The reason people enter into informal arrangements is because they are having difficulties paying back their debts at the contracted rates as set out by the credit card or loan companies.
The positive benefit and advantage of the informal arrangement is that there is no need to seek the agreement or sanction of the county court. It is because of this that informal arrangements’ are so quick and easy to set up.
What are the Advantages and Benefits of an Informal Arrangement?
The main benefits of an informal arrangement are are the following:
- An informal Arrangement is easily produced
- An informal arrangement can be done by you local CAB, Advice Centre or by the informal arrangement team at the UK insolvency Helpline
- An informal Arrangement is free to set up.
- An informal Arrangement can work for both long and short term periods.
- An informal Arrangement is flexible to you changing lifestyle.
What are the Disadvantages and side effects of an Informal Arrangement?
- An informal Arrangement is an non governmental scheme so has no legal standing
- An informal Arrangement request can be ignored if the creditor does not like it.
- An informal Arrangement may only be short term solution because the creditors are likely make monthly reviews
- An informal Arrangement may lead to the legal or collection process being triggered as it is an admission of debt.
- Our professional experience suggests that these type of arrangements are more often than not are only successful when handling a small number of creditors.
Who are informal arrangements suitable for?
The UK insolvency Helpline has a large team who specialise in the set up of Informal Arrangements. This vast knowledge base means that we know exactly who is suitable for an informal arrangement.
To help people easily identify if they are suitable for an informal arrangement we have provided some basis guidelines:
- You can enter into an informal arrangement if you or we feel you are struggling with your debts and have little disposable income to pay you debts with after taking into account your reasonable living costs.
- You can enter into an informal arrangement if you or we feel the future is uncertain which could mean you think there will be a drop in household income or a rise in living expenses.
- You can enter into an informal arrangement if you or we feel that after carrying out a detailed income and expense analysis you cannot afford to pay the full monthly amounts on your debts
If you feel that you fall under any of the above conditions please contact the informal arrangement team. An informal arrangement can be set up swiftly and with no cost.
An informal arrangement can be implemented for a short or long term plan dependant on what the client’s financial circumstances are.
What is the procedure to set up an informal arrangement?
When you initially approach The UK insolvency Helpline, informal arrangement team we will carry out a very detail income and expenditure analysis.
There is no point in proposing an informal arrangement and then still struggle with your debts. That is why you should sit down and work out all your living costs down to the last penny before you contact the creditors. This will let us know how much you can pay per month or week into the arrangement.
The whole point of an informal arrangement is that we work out your disposable income and offer this to your creditors.
Under an informal arrangement each creditor will get an equal share of the amount they are owed based on the amount you are offering. This new and exciting concept is called the 'pro rata' payment system.
For example, imagine you owe the following debts:
- Capital One Visa - £1,000
- Northern Rock - £2,000
- Egg Visa - £1,500
>> TOTAL £4,500
Now imagine that you have £90 spare to put aside for you debts each creditor would get the following:
- Capital One Visa
£1,000 divided by £4,500 multiplied by £90 = £20 - Northern Rock
£2,000 divided by £4,500 multiplied by £90 = £40 - Egg Visa
£1,500 divided by £4,500 multiplied by £90 = £30
>> TOTAL £90
The key points to a successful Informal Arrangement
- You should look at our section on standard letter to creditors. Send a copy of the standard to each creditor. The Letter is carefully worded to details what your situation is as to why you are offering a lower payment and how much you can offer
- In our standard letter we leave a space to you can explain why you cannot make your contractual payments. NOTE Try not to write a sob story, just be clear and to the point. Remember the creditors receive 1000's of these requests a month and just want know the basics.
- Try and explain top the creditors your estimation of when you feel you situation will improve. For instance if your are off on maternity leave, state when you will return to work.. However if you are on long term sickness or incapacity benefit and will not return to work make it clear that this amount will never increase.
- Include a copy of your calculations illustrating what your income and outgoing are. This is called your income and expenditure account or I and E.
- Provide a list of all you debts owed to all your creditors
- Don't be shy, ask for help, ask for interest and late charges to be waived. REMEMBER... if you don't and ask you won't get.
