Today I am going to talk you through how I set up and run my own Debt Management Plan. The first thing I will say is that it can be a lot of work, especially when you have a large number of creditors to pay and talk to.
So first things first, in case you do not know, StepChange Debt Charity can provide you with a Debt Management Plan and best of all, it is completely free. For further details please visit the Debt Help page or read my StepChange Review.
Now that’s out the way you must be fairly serious about going it alone. The reason I did it myself was because it means I have complete control over my debts. If something goes wrong with a payment or there is some other issue, I can deal with it quickly without having to talk with a third party.
The first thing you need to do is to split up your debts into two types. There are priority debts and there are unsecured debts. Priority debts include debts such as those for your Council Tax or Utility Bills. Your other debts could be things like credit cards and unsecured personal loans as examples.
Once you have sorted out your debts into the two types of debts, if you find that you have a lot of priority debts then your best bet would be to get help. If you are like me and all of your debt is unsecured debt then we can continue.
If you are behind with any of your priority debts or bills you should seek help as soon as possible.
Make a budget. You need to work out a budget as this will help you see where all of your money is going and also allow you to work out how much you can afford to pay towards your debts. You may find this Income and Expenditure Form helpful when calculating this. This form is the same form I use.
Once you have made a budget you now know how much you can pay off towards your debts. If after you have made your budget you find you spend more than you earn then look at an areas where you can reduce costs. If this is not possible then again I would suggest you head over to the Debt Help page and get in touch with one of the organisations on there.
If you used the example income and expenditure form I talked about earlier, you will see there is a box at the bottom that allows you to enter in your debts and the repayment offer is calculated accordingly depending on the size of each debt. In the end all of your creditors get a fair amount of your disposable income. Your disposable income is any income you are left with after paying off all your expenses.
Use my example offer of repayment letter and send that along with a copy of your income and expenditure. Wait for a response. You can usually get away with sending this by email but be mindful that email is not a secure method of communication. I take the risk but you don’t have too.
You will either get a response that says they can accept your arrangement or one that says they cannot. If they agree then it is just a case of setting up your repayment. On a personal note I choose to repay by standing order each month.
If they didn’t agree, set up your repayment anyway and send a further letter outlining why you cannot increase payments. They may have also specified a reason such as “You spend too much on nights out in a month”. Sadly doing stuff like that is quite limited when you are in debt.
Things to consider
- It is a lot of work doing this yourself and is only suitable in certain circumstances.
- Your credit rating will likely get worse, unless you are already at the stage of having defaults etc registered against you.
- A Self Managed Debt Management Plan is only suitable for unsecured debts. Other secured debts cannot be included. You should get help if this applies to you.
- You can get a Debt Management Plan for Free which will save you a lot of work.