Repayment Plan
Making arrangements with your creditors to repay them over a period of time is the most common way of dealing with your debt.
We will help you will work out how much you can afford to pay towards your debts and will help you make offers to your creditors on a pro-rata basis (i.e. in proportion to the size of each debt). Often, creditors will agree to stop adding any further interest and charges. This is an informal method of dealing with your debt and does not involve any courts or contracts. It also allows you to renegotiate the repayment amounts should your circumstances change in the future.
Automatically free of debt?
No
Length of time?
No fixed time, but the debt may take a long time to be repaid if the amount you can offer is small
*Is there a fee?
No, but interest could still be added
Which debts are excluded?
None, but creditors may not agree to the offered amount if it is too small
Impact on assets?
None, but you would need to keep making payments on any secured debt e.g. mortgage
Impact on employment?
Probably not
Credit rating affected?
Yes
Recovery action?
Creditors can still take court action against you
There are several options when considering a repayment plan, and the right option for you might involve a combination of one or more of the following:
Payments from income:
Any money left after your monthly expenses and essential costs is known as ‘disposable income’. This is used to repay your creditors. We will help you work out how much you can afford as well as how this should be divided amongst your creditors (certain debts like rent etc will take precedence).
Payments from lump sums:
Some creditors may agree to write off part of your debt if you are able to pay a lump sum towards what you owe. This may be an option if you have savings, receive a bonus at work, are given an inheritance, or have assets. However, if you have disposable income after your monthly expenses, some creditors will ask that you make payments from that as well.
Token payments:
If you do not have any disposable income, it may be appropriate to offer a ‘token’ amount to your creditors. This could be as little as £1 a month and may be offered for a short period of time to allow you to get back on your feet.
Free Debt Management Plan (DMP)
A DMP is an alternative repayment plan. It works in the same way as a repayment plan, but instead of making repayments yourself, you would pay a single amount to a debt management company who distributes the payments on your behalf. Some companies charge a fee for this, but Crosslight can refer you to a number of organisations that will do this for free. This option is only appropriate for credit debts, it is not appropriate for priority debts e.g. rent, utilities etc.
Feeling overwhelmed by debt or money worries?
Speak to one of our a debt advisors.