You can start a Debt Management Plan yourself or get help. Either way there are a number of steps you will need to go through.

• Choose how to start your Debt Management Plan
• Create a Financial Statement
• Calculate how much you can offer each Creditor
• Negotiate the reduced payments
• Start paying your Plan

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Choose how to start your Debt Management Plan

Because it is not a legally binding solution you can set up and manage a DMP yourself. If you feel comfortable there is nothing to stop you doing this regardless of the amount of debt you owe or how much you can afford to pay.

The alternative to starting the Plan yourself is to use a debt management organisation to help you. This can be an ideal solution if you do not feel confident that you can successfully negotiate with your creditors yourself.

Another significant advantage of getting help to manage your plan is that this will allow you to make just one payment a month which will then be shared between your creditors on your behalf. This can be a great help if you have a large number of creditors and you find it difficult to remember who to pay what and when.

There are two types of debt management organisations to chose from. Those who charge a fee for their service and those who provide the service to you for free.

Create your financial statement

The corner stone of any DMP is a written statement which summarises your current financial situation. You will need to produce this statement which should include detailed information about your net income, your living expenses budget and all of the debts that you want to include in your plan.

It is important to get your financial statement right. Your creditors will expect to be shown a copy of it before they agree to your payment proposals. In particular they will want to review your expenditure figures to make sure they feel these are reasonable and you are making sufficient effort to repay as much as you can.

If creditors feel your living expenses are unreasonably high and your repayment offer is too low your creditors may well reject your proposal and continue to add interest and charges to your accounts.

Calculate how much you can offer each Creditor

Once you have put together your financial statement you then need to calculate the total amount that you can afford to pay into your plan each month and how this will be divided between each of your debts. The amount you can afford to pay into your DMP in total is known as your disposable or surplus income.

You then need to work out how much of your disposal income each of your creditors will get. In order to be fair and ensure that each of your creditors is repaid in the same time you need to split it between them according to what percentage of your total debt they are owed.

For example if you have 4 debts totalling £20,000 and you owe £5000 to each this means that each of your creditors is owed 25 percent of your total debt. Each of them must therefore be paid 25 percent of your disposable income.

Negotiate the Reduced Payments with your creditors

Once you have worked out how much of your disposable income you will pay to each of your creditors each month you are then ready to start your negotiations with them. You will need to write a letter to each one confirming your payment offer.

You should always include a copy of your financial statement with your offer letter so that each creditor can understand how you have worked out your disposable income and how it has been shared between all of the creditors included in your plan.

There is no guarantee that your creditors will accept your payment proposals immediately. Some may do so but others could take more time. It may take 2-3 months from the date your reduced payments start for your creditors to agree to them and stop charging additional interest to your accounts.

If any of your creditors tells you that they will not agree to your payment proposal do not let this discourage you. You should ask them why and see if there is anything you can do to address their issues.

Start your Debt Management Plan payments

Whether or not any of your creditors have accepted your payment proposals it is vital that you start making your payments to each of them straight away.

You must then keep up the payments regularly each month whether you have confirmation from each creditor that they are in agreement or not. This will show your creditors that you are able to pay the amounts you have proposed. Many will actually require you to make 2-3 regular payments before they will formally accept your DMP.

Until a creditor has formally agreed the payment you have offered them it is likely that they will continue to add interest to your account balance. There is nothing that can be done about this. Generally once they have agreed to your payment they will stop their interest charges but this could take 2-3 months.