How Much Will a Creditor Accept in a Debt Management Plan

The simple answer is, as little as £1.00 per month! However in order to get a creditor to accept a payment of one pound per month, you will have to prove to them that this is all that you are able to afford. Quite often when you contact a creditor ABC they will offer you a deal. They might say, “if you pay £5.00 a month, we will stop calling you.” OK, at the time this may sound great, as creditor ABC leaves you in peace. However creditor XYZ may then ramp up the pressure and you do not have sufficient funds to pay creditor XYZ! So the best way to approach this will be by completing an income and expenditure on your current financial situation. This way you will have a clear idea of how much you have available to pay all your creditors each month. Working out how much you pay each creditor is done on a pro rata split.

What is a Pro-Rata Payment/Split to Creditors?

Once you have calculated how much you have available to pay creditors, you can then offer each creditor a fair percentage of payment, based on how much you have a available for all the creditors and how much each creditors is actually owed. The calculation below will give you a clearer picture of how this is calculated.

Pro-Rata Split or Payment for Creditors Calculation

Lets say that when you have completed a full financial fact find on yourself, you find that you have £120 available to pay your creditors. You also have the following debts:
Creditor Debt
ABC £4792
DEF £1232
GHI £1590
JKL £9142
Total £16756

The amount you owe is then divided by the total debt, multiplied by the income available, giving you the monthly payment.
So for creditor ABC it is calculated as follows:
£4792 Divided by £16756 Multiplied by £120 equals £34
Below are the rest of the calculations of a spreadsheet on a pro rata split:

So from the spreadsheet above you can now see how much each creditor would get in monthly payments on a pro rata split. If you work out your own personal finances and pro rata split comes to just £1, then so be it, this is what you would offer that particular creditor! The creditor will also see from your income and expenditure that the funds available are being allocated fairly. DIY Debt Management Plan has further information to help you.

Holidays, Christmas and Birthday Presents etc should be ZERO, as creditors may want that too!

Calculating a Pro-Rata Split for a Full and Final Settlement

This Calculation can also be used for a full and final settlement, Just use the lump sum available, rather than the £120 per month available.

Will Creditors Accept £1 Per Month in Debt Management Plan

Providing you have submitted a full financial fact find showing a breakdown of how much you can pay each creditor on a pro rata split, then a creditor will accept a payment of £1 per month. You will find that a creditor would require a review of you financial situation approximately every six months. They will often ask for a review, in order to see if your situation has improve and you can afford to increase payment to them.

It is also worth mentioning, that should your financial situation get worse, then submit an updated income and expenditure to them and reduce your monthly payments accordingly.

Debt Advice Handbook

I would also recommend getting hold of a copy of the Debt Advice Handbook (below). I have to say that it is not the most exciting book to read, but as a reference book it really is the best. Whatever your financial situation, you will be able to pick up this book and understand what the creditor is doing or planning to do. You will then be able to react accordingly and in many cases be able to prevent further drastic action. Also, search this site for DMP or Debt Management Plan. to see other examples of creditors accepting payments.