A debt management plan is an informal agreement between you and your creditors that allows you to make a lower monthly repayment. To set up a debt management plan, you can either go through a professional company or negotiate with your creditors personally.
Drawing up a plan is the first step to freedom from debt, not the last. This is the route map to debt freedom, so the more thorough and better thought out it is, the faster and more direct your path away from debt problems. With the support of a company like Debtsolver, you can draw on their experience. If you decide to go it alone, you need to be sure that you’re well prepared.
Firstly, you’ll need a Statement of Affairs, which is a clear breakdown of your finances. That’s your total income and expenditure, assets and liabilities.
Next, you need to know the exact extent of your debt problem, so get an accurate statement of your outstanding balance from your creditors. Explain why it is that you are having trouble and hope that they’ll be sympathetic and consent to a lower monthly payment.
When you’ve got a complete breakdown of your outstanding debts and an understanding of the expectations of your creditors, revise your Statement of Affairs. This will let you see exactly what you can offer your creditors in terms of a reduced repayment.
Make a pro rata offer to all of your creditors, based on whatever is available from your income. Hopefully, this will be accepted and you can set up a direct debt in confidence, knowing that you can afford to maintain the repayments.
There are potential dangers at every stage of this process though, many of which can be solved by having a profession deal with your debt management. For instance, overlooking a creditor can be dangerous and frustrating as it will through all calculations off.
However, provided your statement is reasonable reflection of your finances, your creditors will know that any court action would only result in a payment that you can afford anyway, so chasing you for more would be a waste of time and money.
It’s all a matter of trust. If you’ve got the support of a trusted financial institution, your creditors will show more faith in your desire to clear your debt and greater leniency with their terms.