This is pretty unusual. Creditors rarely respond positively to pleas about dire health problems or the struggle to live on a state pension or after redundancy. They will probably be able to sell on your debt for a few pennies in the pound – at least that is something for them whereas they get nothing if they write your debt off.
When should you ask for a write off
If you have a good case for saying that there was something wrong with the original contract, then if you ask the creditor to use their discretion and write off the debt they will sometimes agree.
The types of problems could include:
- you were under 18 when you agreed to borrow the money;
- you weren’t capable of agreeing to the contract (for example because of a learning disability, drink or drugs);
- you were pressured to take out the debt whilst you were in an abusive relationship which has now ended. It is only fairly recently that Financial Abuse is starting to be recognised as the serious problem it often is, see this April 2016 Citizens Advice report;
- you have a long-term mental health condition which makes you particularly vulnerable;
- you were sold something that was clearly completely unsuitable and this was financed by a loan organised with the sale;
- if the lender had not made enquiries about whether the debt was affordable they may be in breach of the Financial Conduct Authority’s CONC 5.2 rule;
- the terms of the contract were misleading.
In some of these circumstance it can be argued that there is no valid contract at all, or you may have a legal remedy because the contract was unfair. However it may not be clear what a court would decide and you may not want (or be able to afford) to take legal action so it can be better to ask for a discretionary write off. The creditor may also be uncertain what a court would decide and so may agree. If the creditor doesn’t agree, you can still dispute that you owe the money if you are taken to court.
Payday loans are a common example of the failure of the lender to check affordability – these are covered in more detail in Can I get payday loan compensation? because this applies not just to asking for outstanding debts to be written off, but also to loans that were repaid.
Is there a better alternative?
There are a couple of situations where you usually have a better option than asking for a discretionary write off:
- if you didn’t take out the debt, you should instead tell the creditor to produce evidence that it is yours;
- if there has been no contact between you and the creditor for more than 6 years, then it may be unenforceable in court because it is too old, see Statute barred debt for more information.
If the debt concerned is part of a bigger debt situation then it may be simpler to just tackle that. The creditor lending to your mum in the early stages of Alzheimers may well have been irresponsible, but if the overall picture means that bankruptcy or a DRO is the best option, there is little point in trying to wrestle with half a dozen or more creditors over individual debts.
How to ask for a write off
Think what evidence you have to support your case. Often this won’t refer specifically to the debt, but it will help explain your situation. Examples include:
- mental health issues are more likely to accepted if you can supply a DMHEF (Debt and Mental Health Evidence Form);
- a letter from the refuge you went to when escaping from an abusive relationship;
- a letter from your doctor or copies of prescriptions, clinic appointments;
- if you are helping someone with learning difficulties and they attend a course at a local college, then a letter from their tutor could help.
Then you need to write a letter to the creditor, enclosing any evidence. This is one situation where can often be helpful if the letter comes on headed paper from an expert rather than from you, so go to your local Citizens Advice office to get help.
If you do want to write the letter yourself then:
- check if the creditor is a member of a Trade Association or Professional Body. If they are, check if there is a code of conduct that they may have broken;
- enclose a Financial Statement with the letter if you can’t afford the debt repayments, also any benefits letters that prove you are on JSA, ESA or Pension Credit. Creditors will be more likely to agree to a write off if it is clear you aren’t going to be able to repay the debt anyway;
- if you think there was something wrong with the original contract, make it clear that you do not accept you are liable for the debt but you are asking the creditor to agree to write the debt off rather than incur the expense of legal action;
- refer to the CONC 5.2 rule (see above) if relevant.
Pros gets rid of a debt completely
Cons can be very hard to get creditors to agree so a ‘debt plan’ based mainly on this will have a low chance of working if there are multiple debts
Debt Camel says Think about getting help to write the letters if you want to try this.