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The mydebt&me self-help toolkit

www.mydebtandme.co.uk


contents Building your personal budget Your personal budget template Who are your creditors? Unsecured creditors form Proposed payment calculation Contacting your creditors Template letter Frequently asked questions What actions are available to my creditors? Notes

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The fact that you are looking at the mydebt&me self-help pack means that you have taken a pro-active decision to tackle your on-going debt problem. By following the easy to complete steps set out in the self-help toolkit will assist you as follows: • provide you with a better understanding of your monthly finances and identify the amount you have available to pay to the people you owe. • highlight areas of cost saving available to you by switching providers of certain services. • in dealing with the people to whom you owe money (your creditors), The self-help toolkit even includes a template letter which you can use to contact your creditors to agree a realistic and sustainable payment plan. Things to consider • do not feel embarrassed about your current position as a significant percentage of the population have similar debt problems. • deal with your debt problems today because if not they will be always be there tomorrow • make sure you only agree to pay what you can afford

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Building your personal budget The preparation of the personal budget is the key part of you being able to manage your debts. By using the income and expenditure statement (see form on next page) you will be able to work out what you can realistically afford to pay, on a monthly basis, to you creditors. The completion of the form will give you the opportunity to assess the level of your expenditure on all of the services you use (gas, electricity, telephone and broadband, motor and household insurance) and you may be able to make cost savings by looking at other service providers for a better deal.

Income You will need to insert all the sources of income your household is in receipt of in Section 1 of the personal budget form. It is important that these details are as accurate as possible if you are to calculate the amount of spare money you will have at the end of each month. Where possible the figures should be taken from wage slips or letters of notification of award. Alternatively the figures can be obtained by checking your monthly bank statement.

Outgoings Your outgoings details will need to be inserted in Section 2 of the personal budget form and covers all of your spending. Accuracy is again essential as it will have a bearing on the amount of spare money you will have each month.

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You will be able to obtain a significant amount of this information from your bank statements.

Amount available for your creditors To work out the monthly amount you have available to your creditors go to Section 3 and insert the total amount of your income and outgoings into their respective boxes. Deduct the outgoings from the income and the balance will be the amount available to your creditors.

Important Note Your personal budget needs to be accurate and realistic and should include all income and outgoings. Should you miss or omit any expenses you may find it difficult to make any agreed payments which may result in you encountering further difficulties in the future.


Personal budget form Your Income (Section 1)

Expenditure (Section 2)

Your Wage or Salary (After Tax)

£

Mortgage

£

Partners Wage or Salary (After Tax)

£

Mortgage endowment policy

£

Job Seekers Allowance

£

Second mortgage

£

Income Support or Pension Credit

£

Rent

£

Tax Credit (working and family tax credits)

£

Council tax

£

Retirement or works pension

£

Water rates

£

Incapacity benefit

£

Ground rent/ service charge

£

Maintenance

£

Building and contents insurance

£

Non-dependants contributions

£

Life insurance /Car insurance

£

others (including pensions)

£

Gas

£

Total Monthly Income

£

Electricity

£

Car Fuel

£

TV licence

£

Magistrate's court fines

£

Surplus Income (Section 3) Total Monthly Income

£

Maintenance payments

£

Total Monthly Expenditure

£

Vehicle Hire Purchase

£

Income - Expenditure

£

Other Hire Purchase

£

Travelling Expenses

£

Household Food and Toiletries

£

Clothing

£

Mobile Phone

£

Broadband/ home phone/ Sky package

£

Prescription and Health costs

£

Child minding

£

Others (including pensions)

£

Total Monthly expenditure

£

I hereby certify that the figures above are an accurate representation of my current financial situation. Name: Address:

Signature(s):

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Who are my creditors? Your creditors will generally fall into two categories:

Secured creditors

Unsecured creditors

• Creditors’ who have lent you money and obtained a legal charge on your assets (Mortgage lender, Secured Loan on your home and Hire Purchase creditor on your motor vehicle),

• Someone who has lent you money without security for the money owed,

• Payments to these creditors are not included in the outgoings section of the Personal Budget Form,

If payments are not continued then they have the right to re-possess the asset subject to the charge,

• These payments should be included in the outgoings section of the Personal Budget Form,

Preparing unsecured creditor form You will need to take particular care in completing this section as you will need, if you are to achieve a successful outcome with your creditors, to ensure that you include all the people to whom you owe money. You will need the following details for each creditor: • Full name of creditor • Your account number / reference • The current amount owed These details can now be entered on to the Unsecured Creditors Form (see next page) Remember to only include your unsecured creditors. Secured creditors need to be included as a payment in your personal budget form as an outgoing. To calculate the amount of your total unsecured creditors just add up the Outstanding Balance column on the unsecured creditors form.

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Unsecured creditors form Name of Creditor

Outstanding Balance

Proposed Monthly Payment

1

£

£

2

£

£

3

£

£

4

£

£

5

£

£

6

£

£

7

£

£

8

£

£

9

£

£

10

£

£

11

£

£

12

£

£

13

£

£

14

£

£

15

£

£

16

£

£

17

£

£

18

£

£

19

£

£

20

£

£

21

£

£

£

£

Make Further Copies of this pages if you need more room

Account Number / Reference Number

Totals:

I hereby certify that the figures above are an accurate representation of my current financial situation. Name:

Signature(s):

Address:

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Proposed payment calculation Having worked out the amount you have available to make payments to your creditors from your Personal Budget and the total amount owed to your creditors from the Unsecured Creditors Form you are now in a position to propose a new monthly payment to each creditor. The figure that you will need to insert, for each creditor, in the Proposed Monthly Payment column of the Unsecured Creditors Form can be calculated as follows:

Proposed payment = Outstanding balance

x

Your total monthly disposable income Your total unsecured debt to each creditor

To assist you in making this this calculation, two examples are set out below:

Example 1

Example 2

Monthly disposable income: Total unsecured debt: Outstanding debt to Santander: Monthly payment:

£215 £3,982.47 £1,209.01

£1,209.01 x £215 = £65.27 per month £3,982.47 The amount of £65.27 would be added in to the proposed monthly payment column, against the specified creditor on the Unsecured Creditors Form.

Monthly disposable income: Total unsecured debt: Outstanding debt to Nat West: Monthly payment:

£215 £3,982.47 £307.59

£307.59 x £215 = £16.60 per month £3,982.47 The amount of £16.60 would be added in to the proposed monthly payment column, against the specified creditor on the Unsecured Creditors Form.

You are now in a position to write to your creditors setting out your proposal for paying your debts.

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Contacting your creditors You will find this part of the self-help process the most daunting but to assist you an example letter has been included for you to use to send to each of your creditors. You will need to add to the letter name and address of the creditor, your account reference number and the proposed monthly payment you are offering to the creditor. These details will be on the Unsecured Creditor Form. Additionally you will need to enclose copies of the following documents with your letter: • Copy of your monthly personal budget • Copies (not the originals) of your payslips, bank statements, HP agreements and any other documents to support your income and outgoings • A copy of your Unsecured Creditors Form with your proposed monthly payments to each creditor

Remember to retain a copy of all the correspondence for your own records.

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Example Letter An example letter to a creditor, you will need to change the details for each of your creditors (word template available on the mydebtandme website)

{Your Address} Date {Creditor Address}

Dear Sirs Re: {Account Number} Over recent months I have been struggling to maintain my monthly credit and loan repayments, including my monthly commitments to the above account. To help resolve these issues I obtained professional advice from mydebt&me. The advice they gave was free and mydebt&me have recommended I deal with you directly. As a result of this advice I propose to make payments directly to you with no deductions whatsoever. Now because of the advice received I am in a position to offer payment to you and my other creditors whilst still maintaining an acceptable standard of living. In support of proposed payment plan, I have enclosed the following documents. • •

A monthly income and expenditure statement, with supporting documentation A list of all my creditors and the proposed monthly payments to each of them (including yourselves).

I want to be able to pay the balance of my account in full, but this unlikely to happen if interest continues to accrue on the balance at a greater rate than I can afford to pay you monthly. In these circumstances, may I please request that once I have made a number of regular payments to you, save over 3 months, you would consider suspending the future interest and charges on the account to enable me to honour my commitment to you? On the basis that my offer is deemed acceptable, I will pay you the sum of £______ to you every month until the balance on my account is cleared. Should my financial situation improve I will advise you of the details and increase my payments accordingly. I would like to thank you in anticipation of your co-operation in this matter and I can confirm that I have contacted all my creditors in the above terms Yours Faithfully

{Your Name}

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Frequently asked questions When will my debts to be paid off? It is difficult to predict how long you will need to have this arrangement in place as your monthly payments can be effected by the following factors: • Fluctuations in your income due to illness, reduction/increase in salary and changes in any benefits received • Whether your creditors will agree to freeze on-going interest and charges • Unexpected increases in household expenditure Any of the above factors will either lengthen or shorten the time it would take you to re-pay your debts in full. You must immediately get in touch with your creditors should your circumstances change in order to re-negotiate your monthly payment. Will my creditors freeze interest and charges? The answer to this question is that some will and others won’t. But generally they will open to reason. Common sense will prevail as it makes no sense for them to accept a payment from you and continue to add interest at a greater amount. When can I cancel my current payments to my creditors? As your creditors agree to the payments proposed in your offer letter you can cancel any existing standing order payments and direct debits and create new ones for the lower amount. To ensure a smooth transition you will need to consider: • • •

The date(s) that you receive your salary(s) The date(s) of your existing payment to each of your creditors The date(s) that you will have funds available to pay the reduced payments.

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What actions are available to my creditors? Default Notice from creditors Your creditors will, if they have not already done so, issue a default notice under the Consumer Credit Act 1974 which will be recorded on your credit history. The default notice advises you that you are in breach of the terms of your arrangement, and that unless you take steps to address this issue the creditor can terminate the agreement. However, by submitting the self-help plan you are taking some form of action but a default notice can still be issued as a warning to other lenders.

Court action by creditors Provided the contents of your self-help plan as a true reflection of your circumstances it is unlikely that creditors will start legal action to recover their debt. This is because: •

The self-help plan demonstrates that you are unable to afford the original monthly payment

•

If they decided to proceed with legal action you would simply provide the court with a copy of your self-help plan showing what you can afford. No court would make an order asking you to pay more than the amount shown in the self-help plan.

If you have been honest and disclosed all the facts you will have nothing to worry about. It is important to remember that the court will be sympathetic to the individual who is pitted against the might of a large financial institution. If your circumstances change and you would like to discuss your situation with us again, please call us on 01257 429242 or email us at contact@mydebtandme.co.uk

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Becoming debt free - for notes:

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voluntary arrangements

debt management plans

debt relief orders

bankruptcy

individual debt advice

go to: mydebtandme.co.uk to download this toolkit and for further information on our services

Tel: 01257 429 242 Suite 1, Oak House, High St, Chorley, Lancashire, PR7 1DW

Self Help Toolkit  

A guide to help individuals deal with their creditors. Includes a guide on how to construct an income and expenditure to prove what you can...

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