Negotiated Agreement

Simply communicating to your creditors can be positive step towards solving problem debts.

This is a way to reduce your debt repayments by explaining to your creditors you’re having difficulties – but want to repay your debt as best you can.

Negotiated Agreement

Creditors are likely be open to negotiated reduced payments once you have proven hardship.

This is better for them than you if you were eventually forced into a statutory debt solution such as IVA or Bankruptcy in which case they would get back less than is owed.

Negotiated agreements may involve either or both of:

  • Ongoing payments from income.
  • One-off payments from a lump sum.

Ongoing payments from income

Your offer of repayments should be your disposable income shared between your creditors pro-rata based on how much is owed to each. This means that all your creditors are treated equally.

Your disposable income is defined as how much you can afford to pay your unsecured creditors once you’ve met your living expenses and essential financial commitments.

Also, ask your creditors to freeze any interest or charges. Your creditors will expect you to give them regular updates of your income and expenditure so that they can see whether you can increase your payments.

One-off payments from a lump sum

You can offer to make a full and final settlement if you have a lump sum available – but not the disposable income to make continuing payments.

A full and final settlement is where a borrower makes an offer of a one-off partial payment to a creditor in exchange for the full settlement of a debt.

However, if you do have some disposable income, creditors may expect you to make at least some payments from that as well.

Token payments

If you can’t make payments temporarily, for example because of a short ­term illness, creditors may agree to accept no payments or token payments of say £1 a month, but only for a limited period. Token payments are suitable if you expect your situation to improve within the next 12 months.

A pro-­rata offer means you make payments equally to all your creditors based on your disposable income.

For example if you have total debts of £17,500 and a disposable income of £200 a month.

You have two debts:

  • Credit card X has a balance of £12,500
  • Credit card Y has a balance of £5,000

Credit card X
Multiply the amount you owe credit card X by your disposable income, then divide by your total debt. The result is the pro­rata amount you should offer credit card X.

£5,000 x £200 = £2,500,000

£2,500,000 / £17,500 = £142.86.

Credit card Y
Multiply the amount you owe credit card X by your disposable income, then divide by your total debt. The result is the pro­rata amount you should offer credit card X.

£12,500 x £200 = £1,000,000
£1,000,000 / £17,500 = £57.14

So your pro-­rata offers would be:

  • Credit card company X = £142.86
  • Credit card company Y = £57.14

Negotiated agreement advantages

Fair and open

A fair and open way of sharing payments, widely understood by creditors.

Help with budgeting

You do not need an advice agency to negotiate these payments for you; although one may help you.

Creditors can’t decline payments

Creditors can’t refuse any payments you make to them.


You may be able to vary your payments again if your situation gets worse or you face unexpected essential spending.

Negotiated agreement considerations

Creditors may refuse to agree with what you propose, but it’s always worth asking them to reconsider, although they can’t refuse any payments you make to them.

Creditors may refuse your proposal unless your circumstances have been independently reviewed by an advice agency or insolvency practitioner.

Creditors may refuse to freeze interest or charges, but it’s worth asking them to reconsider.
If you can only afford small payments, they may not be enough even to cover interest or charges, and your debts will increase.
Creditors could still take action against you, for example by getting a court judgment and then an order that creates a charge on your home.

*Creating a charge on you home means turning an unsecured debt to once secured on your property.

You are responsible for administering all the payments yourself and keeping creditors informed of your circumstances.

By making reduced payments you are breaking the terms of your credit agreements.

This will affect your credit ratings should your creditors inform the credit reference agencies.

The less you are paying; then the less likely creditor will accept the situation in the longer term.

Token payments are only likely to be accepted for 3-6 months.

You remain liable to pay the full amount of your debts; unless you have negotiated a full and final settlement.

Swift do not currently offer negotiated agreements of this type. However we can assess your situation and explain your options.