Why Settle or Agree a Payment Plan?

Settling a debt by agreement is often the quickest and most predictable way to resolve a claim. It avoids the uncertainty and expense of court proceedings, and gives both sides a clear path forward. This approach is especially useful if:

• The debtor responds after your polite chase or Letter Before Action.

• You want certainty and closure, without ongoing costs or hassle.

• You’ve already won a judgment, but are open to structured payments rather than immediate enforcement.

When to Use a Settlement or Payment Plan

You might use these templates if:

• The debtor admits the debt but can’t pay in full right away.

• You want to avoid court, but still need a formal agreement.

• You’re willing to accept instalments, either before or after judgment.

Settlement Proposal Template (No Judgment Yet)

Here’s a copy-and-paste template you can use to propose a settlement before court proceedings begin. Fill in the blanks and send by email or post.

Subject: Settlement proposal – claim re: £[amount] (invoice [INV-XXXX])

Dear [Name],

Without prejudice save as to costs, we propose the following to settle the debt:

1) Payment of £[total] by [date] (or £[instalment] per [week/month] from [date] to [date]).
2) If payments are made on time, we will not issue court proceedings.
3) If any payment is missed by more than [7] days, we may issue a claim without further notice for the full balance plus costs and interest.

Please confirm acceptance by reply email.

Yours faithfully,
[Your name]

Post-Judgment Payment Plan Template

If you’ve already won a judgment, but the debtor can’t pay in full, you can agree a payment plan. Here’s a template for that situation:

Subject: Payment plan re: judgment debt £[amount] (Claim no. [XXX])

Dear [Name],

We agree to accept £[instalment] per [week/month], starting [date], until the judgment debt and costs are paid. If a payment is missed by more than [7] days, we may proceed with enforcement without further notice.

On full payment, we will notify the Court that the judgment is satisfied.

Yours faithfully,
[Your name]

Making Your Agreement Clear and Effective

For more complex arrangements, consider using a Tomlin Order or consent order. These are formal court-approved agreements that can include detailed terms and provide extra protection if things go wrong. For most cases, though, a simple letter is enough.

Keep your agreement clear and specific:

• Set out exact dates, amounts, and what happens if payments are missed.

• Confirm bank details and payment references to avoid confusion.

• Diarise payment dates and check in regularly to make sure everything stays on track.

Example:
You’re a self-employed decorator. After chasing a £900 invoice, the debtor admits they’re struggling and proposes to pay £300 per month. You accept with a clear letter, setting out the payment dates and consequences for missed payments. The debtor pays on time, and you avoid court altogether.

Details to Consider

• Triggers and Consequences: Make sure your agreement spells out what happens if payments are missed. This could mean issuing a claim or starting enforcement.

• Bank Details: Always confirm where payments should be sent, and what reference to use.

• Receipts and Records: Keep copies of all correspondence and receipts. This helps if you ever need to prove what was agreed.

Common Pitfalls

• Vague Promises: Agreements without clear dates or amounts can lead to confusion and disputes.

• Letting Plans Drift: Without diarised checks, payment plans can slip and debts remain unpaid.

• Forgetting Default Terms: Always confirm what happens if a payment is missed, so both sides know where they stand.

What Happens Next?

Monitor payments and keep records. If the debtor pays in full, you can close the case and, if relevant, notify the court that the judgment is satisfied. If payments are missed, you can revert to your chosen enforcement method—such as bailiffs, Attachment of Earnings, or a Charging Order.

Example:
A freelance web designer agrees a payment plan for a £1,200 debt. The client pays £200 per month, and the designer keeps receipts and records. When the debt is cleared, the designer sends a final receipt and closes the case.

Relatable Scenarios

• Small Business Invoice: You run a cleaning service and a shop owes you for regular cleaning. After chasing, you agree a payment plan and avoid court.

• Personal Loan: You lent £500 to a friend. After a few reminders, you agree a repayment schedule and keep records of each payment.

• Trade Services: A plumber agrees a payment plan with a landlord after winning a CCJ. The landlord pays monthly, and the debt is cleared without further enforcement.

Why This Approach Works

Settling by agreement is often the most practical way to resolve debts. It gives both sides certainty, avoids unnecessary costs, and helps preserve relationships. By keeping your agreement clear and monitoring payments, you can recover what you’re owed without extra stress.

Caira: Your Debt Recovery Companion

Caira is backed by tens of thousands of legal documents and updated weekly, making it a reliable source for practical, up-to-date information. Unlike generic websites or chatbots, Caira’s responses are grounded in real cases and current law, so you can feel confident navigating debt recovery yourself.

Disclaimer:
This article provides general information for England and Wales only. It’s not legal advice. If you have a specific situation or want feedback on your draft agreement, you can upload it to Caira for instant, practical suggestions.

By agreeing a clear settlement or payment plan, you give yourself the best chance of resolving debts quickly and fairly. If you need to take things further, you’ll have a solid foundation and a clean record of your efforts.