Here is how to prepare a financial statement, for the purpose of
negotiating reduced payments with your creditors.
Secured/Unsecured debts.
Before we get into the substance of this, let's ensure we are
clear about the significance of secured debts.
If the debt is secured, there is a risk that the item upon which
the debt is secured could be re-possessed, if payments are not
maintained. One of the most common forms of secured debt is the
mortgage -- which also typically represents a very large debt
and therefore a potentially very large problem.
There are two important points to note concerning
secured/unsecured debts and attempting to reduce payments.
1. any creditor who is owed a secured debt has no reason to
accept reduced payment. The creditor, in nearly all cases, would
rather re-possess the item upon which the debt is secured
2. The borrower must be aware that, in the case of a secured
debt, any change in the agreed payments carries a risk that the
item upon which the debt is secured could be re-possessed,
unless the creditor agrees in advance to accept the change.
Thus, in most cases, it is only unsecured debts which offer the
chance of a potential reduction in payments.
Right, on to the financial statement.
The following are the items you should list, where applicable,
in order to present your total income and expenditure. You
should calculate and enter a monthly figure for these items.
You might like to copy and paste the following items into your
Word Processor/Spreadsheet/Text Editor for printing out.
INCOME
Wages Salary (after all deductions)........................
Partners or second salary (after all deductions)...........
Benefits
Unemployment...............................................
Maternity..................................................
Sickness/Invalidity........................................
Child/One Parent...........................................
Retirement.................................................
Income Support.............................................
Family Credit..............................................
Contributions
Maintenance................................................
Lodger/Dependants..........................................
TOTAL........................................................
EXPENDITURE
Rent/Mortgage................................................
Rent/Mortgage Arrears........................................
Second Mortgage..............................................
Endowment/Mortgage Protection................................
Child Maintenance............................................
Life/House Insurance.........................................
Council Tax..................................................
Water Rates..................................................
Gas..........................................................
Electric.....................................................
Telephone....................................................
Clothing.....................................................
TV Licence/Rental............................................
School Meals.................................................
Meals at Work................................................
Car Tax/Insurance............................................
Travelling Expenses..........................................
Spending Money...............................................
Total .......................................................
You should ensure that this total expenditure figure is sufficient for your
needs, and that no items of expenditure can be considered
excessive. Obviously, total expenditure cannot be MORE than
total income.
Your income figures will need to be proven by a copy of a recent
payslip.
Look out for How To Get Rid Of Debt Problems Step 3, where we
look at 'How To Negotiate Reduced Payments With Creditors'
Rob Hawkins is the owner of
Debt Consolidation UK. His company Chiltern Debt Management UK has helped more than 50,000 people to get rid of debt problems, and won the coveted 'Debt Counsellor of the Year 2004' award.
