You can set up a Debt Management Plan yourself in most cases. It depends on the types of debt you have and how confident you would be managing it.
This post will tell you what you need to know about setting up your own Debt Management Plan and provide links to posts elsewhere on this blog to help you get started.
What is a Debt Management Plan?
It is simply an informal plan to help you make some form of payments towards your debts. Normally this amount is less than what your contracted repayment amount would be.
You first find out how much you owe to each debt, then work out how much you have left after paying your other expenses which leaves you with your surplus or disposable income. It is this money you use to pay towards your debts. Simple right?
Well on the face of it, yes that all seems well and good but it can be a bit of work setting up your own Debt Management Plan and keeping on top of things.
What do you need to set up your own Debt Management Plan?
There are some things you need to set up your own plan and the links below will take you to those things.
– Here is a complete guide to setting up your own Debt Management Plan.
What are the first two things in the list above? Well the Income and Expenditure is basically a sheet where you can enter all your expenses and information about your debts. The sheet then calculates the payments so that each of your debts gets a fair share of money from your disposable income.
The Offer of Repayment Letter is just a template you can use to write or e-mail the people you owe money too. These two very documents are what I used to set up my Debt Management Plan and I continue to use them to this day.
The last link is a complete guide which tells you how you can set up your own Debt Management Plan. It is quite long and possibly boring at the same time.
Wait, you said you can set up a Debt Management Plan in most cases, what did you mean?
There are some types of debts you cannot add to a Debt Management Plan, priority debts being one of them. Instead these debts would form part of your normal expenses, because they are a priority.
I wrote a post a while back about Priority Debts and the link to this post can be found below.
Other debts you cannot include on a Debt Management Plan include Mortgages and other secured debts.
If you owe a lot of money like me, a Debt Management Plan might not be the best option if you are looking to get out of debt quickly. For example other solutions such as an IVA or Bankruptcy could be better suited to you. At the top left hand corner of this page, I provide links explaining what each of these debt solutions involves if you would like to find out more.
A Debt Management Plan is only an informal arrangement and so creditors are still able to take you to court if they wish. This hasn’t happened to me and I have a lot of debts, but it is a possibility and something to keep in mind.
Keeping on top of things can take time. For example debts will be moved around to different debt collection agencies, meaning you have to set up new standing orders and check that the balance transferred is correct. This isn’t too bad if you only have a few debts but is more challenging when you have 20!
I think I want help setting up a Debt Management Plan
No problem. If all this sounds too much then that’s fine, it is not for everyone. Luckily for us there are places who will provide you with a Debt Management Plan. Please visit the debt help section of this site to get started. Good luck with whichever path you choose. If you have any questions please let me know.