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How much will my Debt Management Payment be

How much will my Debt Management Payment be

Your debt management payment is based on what you can reasonably afford. However there is a minimum amount necessary to start a Plan.

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How to work out what you will pay in a Debt Management Plan

Your debt management payments are based on the money you have left over after all of your living expenses are accounted for. This amount is called your surplus or disposable income.

To calculate your disposable income you deduct your total living expenses from your total income. For example if your income is £1300 a month and your living expenses are £1150 your disposable income is £150/mth (£1300 – £1150 = £150).

It is vital that you add up all your living expenses correctly. You must include all the expenses you need to live on from your rent and food to car insurance and entertainment. Use our living expenses guide to help you put together your list.

When totalling your income you should use all sources including wages, benefits and any other money you receive such as pension payments.

Is there a minimum debt management payment amount?

There is no legal minimum debt management payment. However in reality it is unlikely you will be able to start a plan unless you can afford to pay at least £100/mth towards your debts.

Your monthly payment may be greater than £100 but still relatively small compared to the total debt you owe. This does not stop you using a DMP. Your creditors will accept low payments if this is truly all you can afford.

Nevertheless in these circumstances your Plan may last a very long time. If its projected length is more than 5-6 years it might be wise to consider whether an alternative solution such as an IVA or bankruptcy would be a better option for you.

If your surplus income is very low your payments could be supported by a third party. It is perfectly acceptable for your partner or a friend to give you money to help increase the payments you can make.

Do you have to pay 100% of your surplus income into your plan?

It is generally recommended that you make your debt management payments as high as possible. This will mean that your debts are repaid in the fastest time. However there may be an advantage to holding some money back.

One reason for doing this is so you can save a little each month. It is always useful to have some savings so that you can pay for financial emergencies if they occur.

Saving can also help you repay your debts faster. Once you have saved enough you could use the funds to settle one or more of your debts early.

If your creditors believe you are not paying as much as you can into your Plan they may not agree your payments. As such it may be best to pay as much as you can initially.

Will you have to prove your income and living expenses to start a DMP?

If you want your creditors to agree your debt management payments you will always have to provide them with an income and expenditure statement. This shows how you have calculated what you can pay them.

Your creditors will review your living expenses budget. Given that your expenses fit within their acceptable guidelines they will normally be happy. It is unusual that they will require any written proof.

If you are using a debt management provider to manage your Plan they will normally ask you to prove your income and expenditure with bank statements and wage slips.

A DMP is not a legally binding agreement. As such you do not have to provide evidence of your income or expenses to your creditors. However if you do not it could influence their acceptance of your payments.

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