DIY Debt Management Plans : The Process

Step 1 : List all your debts

The first step is to simply make a list of all your creditors, how much you owe each of them, and the current monthly repayment amounts. Once this has been done, you can split these debts into what are known as ‘Priority’ and ‘Non-Priority’ debts so you know which you need to deal with first. You can use this template to make your list.

Priority Debts
The first debts you’re going to want to address are your priority debts. These are debts which could result in serious consequences if left unpaid without negotiation. The outcome could range from home repossession to utility disconnection, and possible custodial sentences.

  • Council tax arrears - read more..
  • Mortgage arrears
  • Court fines
  • Income tax or VAT arrears
  • Child support
  • Rent arrears
  • Gas and Electricity

If your priority creditors are threatening to take court action against, you should immediately send them a holding letter explaining your problems (sample here). Tell them that you will contact them in the next two to three weeks. They will likely give you some time to start your financial planning but do not take advantage of their good will.

Non-Priority debts
Non-priority debts will not result in a custodial sentence but creditors still have the power to apply for a court order to repossess your belongings.

  • Parking penalties
  • Student loans
  • Borrowed money from friends
  • Borrowed money from family
  • Benefits overpayments
  • Overdrafts
  • Hire purchase
  • Catalogues
  • Personal Loans
  • Credit and Store Cards


Step 2 : Calculate what you can afford to repay

Now you need to make a complete list of income, including your wages, benefits, tax credits and any other form of income. Complete honesty is crucial to this process being successful. Along side your income, list your essential expenses. These should include things such as ;

  • Utilities (Gas, Electricity)
  • Council Tax
  • Rent / Mortgage
  • Insurance
  • Food and Travel
  • TV licence
  • Clothing and household products

You can use this template to list your income and expenses, or use our income and expenses calculator to make the calculations for you to simply print a copy. The results of your income minus essential expenses will show how much money you have available to make repayments and begin clearing your debt.


Step 3 : Your repayment strategy

Priority Debts
If you find you have enough remaining after your essentials are covered to meet your priority debt repayments, these should be taken care of first. Ensure you have standing orders or direct debits in place for these repayments and that you always have enough money in your account at the right time so no instalments are missed. You then only have to negotiate with your non-priority creditors.

If you find that your available funds will not cover all your priority debt repayments, the very first thing you should do before proceeding is to contact the creditors in question and inform them of your circumstances. Displaying honesty and a willingness to repay can go a long way and you will find many creditors can be sympathetic and appreciative of your proactive approach. You are likely to receive modified repayment plan suggestions from some of your creditors right away.

You should negotiate with your Priority creditors to get the best repayment plan they are willing to offer. Bear in mind you may have several priority debts to repay as well as your non-priority debts, this should be explained to your creditors during your negotiations. You can read our tips on how to negotiate with creditors effectively to help you.

Non-Priority Debts
Any money you have left each month after your re-negotiated priority debts are covered is known as your ‘available income’ and will be used to repay your non-priority debts. You can use the formula below to calculate how much you should offer to each of your non-priority creditors. It is used by the courts when assigned repayments so should be recognised and respected as fair by your creditors.

If you prefer, you can use this version here to make the calculations for you.

Example of how the calculation works :

You owe ‘Creditor A’ £5000, and ‘Creditor B’ £3000
Your monthly available income is £100

‘Creditor A’ calculation;
[Amount owed] x [available income]
(5000 x 100 = 500,000)

Then [result from above] divided by [total debt to all creditors]
(500,000 / 8000 = 62.5)

You would therefore offer £62.50 per month to creditor A

This same method is repeated for all your creditors and will ensure they are all offered an amount relative to your available income, and proportionate to the amount owed.


Step 4 : Contacting your Creditors

Once you have completed the steps above, you will need to speak, or preferably write to your creditors explaining your situation. Send them your calculations and the lists you have made as part of the above process but ensure you keep copies. This information is known as your ‘Statement Of Affairs’ and should be submitted to all creditors involved in full. During negotiations you should ensure you keep copies of all correspondence.

If you find your negotiations break down, or are becoming too stressful for you to deal with on your own please feel free to get in touch with us. We can provide guidance on where to seek additional help and support. If a debt management plan appears to be insufficient for your level of debt, we can also suggest which other solutions may better suit your situation.



To get the best information for your circumstances it is always recommended to speak with a qualified adviser. We could be helping you in a few short minutes in a friendly, no-obligation chat : Request a call back or call us on 0800 043 3329

Alternatively if you would prefer to receive information by e-mail, please feel free to contact us via this simple form.

If you are looking for a specific company, you can browse our list of UK debt management companies.