How To Setup A Debt Management Plan
When I first came to realisation that I wouldn’t be able to pay my debts, I sought advice from the Consumer Credit Counselling Service. Their advice, whilst being quite helpful to a degree, can only really be taken with a pinch of salt.
Why? Because, as I understand it, they are a charity which receives a lot of their funding from the major banks. Thus there agenda is no doubt influenced by the agenda of the banks which indirctly help to finance them.
It’s no wonder that with the CCCS they will not, in my experience, setup a debt management plan unless the payment is equal to or more than 1% of the outstanding balance of the debt.
You can of course setup your own debt management plan with your creditors, and here’s how to do it.
Keep your creditors informed
Write to all of your creditors informing them that you are currently experiencing financial difficulties and need to agree a reduced payment for the next six months.
You should include with this letter a full budget of your income and outgoings, accrue within this budget for yearly costs such as car insurance, dental/optometric costs, car servicing, road tax etc.
Allocate your payments in proportion to each creditors debt
Once you have produced a monthly budget, allocate the remaining income to your creditors in proportion with the amount of debt you owe each one.
For instance, if you have £100 a month to be split between two creditors, and creditor A is owed £1,000, and creditor B is owed £9,000, you should pay creditor A £10 a month and creditor B £90 a month.
To work this out, simply add the total amount debts owed together (£1,000 + £9,000) and then divide by each individual debt to get the proportion to be paid to each.
Creditor A: £1,000/£10,000 = 0.1
Creditor B: £9,000/£10,000 = 0.9
Then use this to multiply against the monthly surplus to give a figure for each creditor.
One Comments to “How To Setup A Debt Management Plan”
[...] presents How To Setup A Debt Management Plan posted at How To Eliminate Debts, saying, “A guide to how to setup a debt management plan for [...]