How To Get Rid Of Debt Problems Step 2 -- How To Prepare A Financial Statement
Here is how to prepare a financial statement, for the purpose ofnegotiating reduced payments with your creditors.
Secured/Unsecured debts.
Before we get into the substance of this, let's ensure we areclear about the significance of secured debts.
If the debt is secured, there is a risk that the item upon whichthe debt is secured could be re-possessed, if payments are notmaintained. One of the most common forms of secured debt is themortgage -- which also typically represents a very large debtand therefore a potentially very large problem.
There are two important points to note concerningsecured/unsecured debts and attempting to reduce payments.
1. any creditor who is owed a secured debt has no reason toaccept reduced payment. The creditor, in nearly all cases, wouldrather re-possess the item upon which the debt is secured
2. The borrower must be aware that, in the case of a secureddebt, any change in the agreed payments carries a risk that theitem 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 thechance 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. Youshould 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 yourneeds, and that no items of expenditure can be consideredexcessive. Obviously, total expenditure cannot be MORE thantotal income.
Your income figures will need to be proven by a copy of a recentpayslip.
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.
