Do I have to accept a payment plan from a debtor?

No. An offer is only an offer, and you can accept it, counter it or refuse it. Before you decide, ask for figures that show what the debtor can really afford, because a plan that is too big for their means will fail. If you refuse, say so in writing and say what you will do next, so the record shows the debtor was given a clear chance to pay.

Does accepting instalments affect interest and compensation?

It can, depending on what you agree. On a qualifying business-to-business debt you can claim statutory interest at 8% plus the Bank of England base rate and fixed compensation per invoice. Decide before you agree a plan whether you will keep them or drop them, and say which in the written agreement so there is nothing to argue about later.

What should the plan say about missed payments?

That if any payment is missed by more than a stated number of days, the full balance falls due at once and you may issue a claim or instruct an agency without further notice. Agree this up front, in writing, so a missed payment has a clear consequence and you are not starting a debate when it happens.

What if the debtor pays a few instalments and then stops?

Treat it as a default and act quickly, using the clause that made the whole balance due. Every payment received so far reduces the debt but also shows the debtor can find money, which helps if you then instruct an agency or issue a claim. Keep a dated record of each payment and each missed date.

Debtor offers to pay in instalments: should you accept?

When a customer who owes you money offers to pay in instalments, the right answer is usually “yes, but on my terms, in writing.” Accept when the debtor is open about being short of cash, the first payment is real and the plan is short enough to trust. Refuse, or counter, when the offer is vague, starts months away or looks like a way to avoid a firm deadline. Whatever you agree, write it down and say what happens when a payment is missed. A plan can be a quick way to be paid in full. Done carelessly, it can cost you your interest, your leverage and months of time.

Why an offer can be good news

A debtor who proposes a plan has, in practice, admitted the money is owed and said they intend to pay. That is more than most overdue accounts ever give you. It also tells you where you stand: a customer who says they cannot pay everything this month is describing a cash flow problem, which is different from one who is ignoring you, disputing the work or heading for insolvency.

The alternative to a plan is not always a better outcome. Taking a business to court costs a fee, banded on a published court scale, paid up front, and a judgment still has to be collected. A debtor who can pay £500 a month but not £6,000 today will not become able to pay £6,000 because you issued a claim. If the plan is realistic, it can get the whole debt back sooner and more cheaply than the formal routes.

Sorting a real offer from a stalling one

A genuine offer usually has these features:

A figure and a date. “£1,000 now and £500 on the first of each month” beats “I’ll sort something out.”
A first payment that costs them something. Money in your account the same week is worth more than any promise.
Openness about means. A debtor who explains their position, and will share figures, is more likely to keep going.
No new conditions. If the offer arrives with a new complaint about the work or a demand for a discount, you are being asked to settle a dispute, not agree a plan.

A stalling offer has the opposite features: no amounts, no dates, a request to “hold off” and sometimes a promise to pay as soon as a big job comes in. If you can’t tell the difference, ask for a short statement of income and outgoings. How the debtor reacts to that request tells you most of what you need to know.

If the debtor is an individual or sole trader and you have followed the Pre-Action Protocol for Debt Claims, the Financial Statement form they can return is built for exactly this. It gives you the figures to judge an offer.

What to put in the agreement

Agree the plan by signed letter or email that both sides keep. At a minimum it should say:

The total owed, and that the debtor accepts it is due.
Each payment, its amount and its date, and how it is made.
What happens on default. If any payment is missed by more than a few days, the full balance falls due at once and you may issue a claim or instruct an agency without further notice.
What happens to interest and compensation. On a qualifying business-to-business debt, you can claim statutory interest at 8% plus the Bank of England base rate and fixed compensation per invoice. Say whether you are keeping them, or dropping them only if every payment arrives on time.

Keep it short and plain. A one-page agreement that a debtor understands is more likely to be honoured than a long one they have not read.

What part payments do to the time limit

In England and Wales you generally have six years from when the debt fell due to bring a claim. A part payment made before the six years run out, or a signed written acknowledgement of the debt, starts that period again. So a debtor who pays instalments is, as a side effect, giving you fresh time. That is useful protection for a plan that runs for a year or more.

Do not lean on it for an old debt. If the six years are nearly up and the debtor has not yet made a payment or signed anything, take advice before agreeing anything on a debt close to the limit.

An offer that depends on someone else

“I’ll pay when my customer pays me.” This is a promise that depends on someone else, and you cannot enforce it. Ask for a fixed date instead, or a first payment now.

Should an agency run the plan?

Chasing instalments is dull, repetitive work: checking the account each month, sending reminders and escalating the first missed payment. It is routine for a debt collection agency, which will also put the debtor on a plan that matches what they can afford and report back to you. The decision to accept still belongs to you.

Check how an agency charges on a plan before you instruct one. Charging on a plan varies: some agencies take commission on each instalment as it arrives, others in full when the plan is agreed. Our guide to no-win-no-fee against no-collection-no-commission explains what to ask, and what happens when you hire a debt collector covers how offers come back to you for a decision.

When the plan fails

Some plans fall apart after two or three payments. That is why the default clause matters. If a payment is missed, write promptly, name the missed date and state that the full balance is now due. Then do what you would have done without the plan: an agency for an undisputed debt, or a claim for a disputed one. Our guide to what to do when a letter before action is ignored sets out how to choose. The payments received so far reduce what you are owed, and they are evidence the debtor could pay.

The short version

Say yes to an offer that is specific, starts with real money and fits what the debtor can afford. Put it in writing, keep your interest and compensation, and make one missed payment bring the whole balance due. Treat any payment as a fresh start for the limitation clock, but never as a reason to stop watching the account.

If you would rather not run a plan yourself, you can compare vetted UK debt recovery agencies on Collect Compare, with names hidden until you choose, or let us match you to the right one. It is free for creditors: the agency you choose pays for the introduction, and no agency can pay to rank.

This is general information, not legal advice. Settlement terms, limitation and interest have strict requirements, so take advice on your specific debt before agreeing a plan or issuing a claim.