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Disposable Income
Your disposable income is required if you want to reduce payments to your creditors when you can no longer afford the normal contractual payments.
Debt management plans use your disposable to work out what you can genuinely afford to repay your creditor commitments. This page explains how to work out your disposable income for yourself should you need to reduce your debts without contacting a debt management company.
A debt management company would get far better results from your creditors as they are under no obligation to accept any new creditor payment arrangements & putting this to them through a debt management company will normally yield better results.
Work out your income
You will need to work out your income on a monthly basis as most creditors will prefer to have regular monthly payments.
The key to working out your income is not to take the lowest or highest amounts you may get each month but rather an average of what your normal take home pay would be.
You may also be interested in a Debt Management Plan
Work out your committed outgoings
Your committed outgoings are what you need to pay each month. These include a number of things, the most common are listed below
- mortgage or rent
- Council Tax
- Electric, Gas and other utility bills
- Telephone
- Car expenses
- Work travel
- School fees (school dinners, kids travel to school)
- Food
- Clothing
- Pet allowances
- Priority debts
This is not an exhaustive list but the main things to be considered are listed above, we have a page on priority debts which should help you understand how to these should be handled. With things like your phone bill or water bill which you may be paying quarterly simply divide your normal quarterly bill by 4 to get a monthly allowance.
After you have added all these together, which will ensure you have made allowances for the essential living costs we can deduct this from your monthly take home pay.
What's left is your disposable income and is what you can genuinely afford to pay your creditors.
What amount of my disposable income should my creditors get?
Your disposable income should be spread around your creditors on the basis that whoever you owe the most to get paid the most.
Doing things this way means each creditor would receive a payment based on the percentage of how much you owe them and how much you can afford to pay which is the fairest way of spreading your disposable income around your creditors.
If you require further help, information or assistance contact us today.
