How is an informal debt agreement budget set up? Get back in control of your debts

The key in establishing a realistic budget is to be completely honest about your income and expenses as well as looking at what outgoings can be cut or at least reduced.

If someone has never looked at setting budget in the past doing so can prove quite confronting as people are often shocked to learn how much they are actually spending when compared to the amount of income they have.

Many people feel like they are always short of funds even though they have a good income and it is not until they stop to look at where each dollar is going is it clear as to why.

When setting up a budget that is to be presented to a credit provider for a financial relief application it is most important to look at  reasonable outgoings. Items in question can take a number of forms however excessive spending on cigarettes, alcohol or gambling are major culprits.

From a credit providers point of view it can be a challenge to cooperate with a borrower that is saying they are unable to pay their debts when it is clear that the reason for this is large amounts of money is being spent on items that could be controlled.

Having said this, a credit provider is still under a obligation to offer financial relief if a borrower is unable to meet their commitments due to financial hardship however they will be more inclined to offer the maximum level of assistance if they can see that the person is being reasonable and realistic about their funds position.

When setting a budget with an informal debt agreement in mind, it is all about establishing a realistic surplus, in other words how much money is left each month after all outgoings and living expenses. It is this surplus that is offered to the persons creditors on a pro rata basis for reduced payment plan.

The amount offered to creditors as ongoing payments may be hundreds or even thousands of dollars less than what they might have been demanding however as long as the surplus funds position is realistic the credit provider is under a legal obligation to offer financial hardship and accept the offer made.

John Dickinson
Just Budget Pty Ltd

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