Debt management

How to prepare a debt management plan

Step 1: Work out your total income from all sources and your total living costs (as determined in your budget). Allocate some money to an emergency fund to allow you to meet unplanned expenses, such as a doctor’s bill or car repairs.

Amount ($) per month
Total income $1620
Total living costs $1280
Emergency fund $100
Funds to pay debt $240

Step 2: Prepare a list of all the people and parties you owe money to, what you owe them, the interest rate and how much you agreed to pay under the contract.

Step 3: Make a decision about how you will allocate the available funds to make repayments against these debts. You may decide to:

  • split the available money evenly between all creditors
  • pay each creditor a percentage of the normal payment due
  • pay more off those debts with higher interest
  • request that certain repayments be postponed for a specific period, and use the money to pay the other debts.

Step 4: Contact your creditors and, based on the decisions you have made about the affordability of each of the debts, propose a payment plan. Make sure that you only commit to a payment plan that you will be able to afford.

Step 5: Commence making the payments according to your plan and your discussions with your creditors.

Step 6: Keep your creditors advised about your circumstances, particularly if you find you are unable to maintain your renegotiated arrangements.

Step 7: Contact a financial counsellor for assistance with preparing your personal debt management plan or if your living costs exceed your income.