Creating Disposable Income

Now we need to look at how we work with the disposable income (£224.00) we have found by completing the second form which excluded all of your unsecured creditors.

Of course our plan is to make sure that we take care of your unsecured creditors by making what is call a pro rata offer of payment, Pro Rata basically means that each of your creditors will receive an offer of payment relative to the amount you owe them, so the creditor who you owe the most to will receive the largest payment.

I will now show you how to work out a pro rata offer of payment. This process we are about to follow is the same one that a debt management company would employ only they would charge you as much as 25% of your disposable income to do so, by doing it yourself you can save that money to pay your creditors which means they will be paid 25% faster.

If we look at the total list of unsecured creditors above, we can see that we have a total of £21,450.00 which we owe to our creditors, that figure of £21,450.00 represents 100% of our total debt and the disposable income figure of £224.00 represents 100% of the money we have each month to pay that debt. What we are going to do now is work out what percentage each creditor represents of the whole debt.

From the second table (below) we can now work out how much each creditor should receive of the £224.00 we have in our disposable income column, for example credit card C should receive 12% which is £26.88. See the next table for all the offers of payment:

Once you have completed this exercise with your own personal income and expenditure sheet you should balance each month which each of your creditors receiving payments in line with your disposable income. If like the example we have used you are now using every last penny you should now look at ways of both saving money and or increasing your income.

The good news is now that you have done this you should now be able to see a way through your debt problem. Over the next few pages we will talk you through how you should talk to your creditors with a view to them accepting your new offers of payment.

next page: Managing your creditors