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  1. #1
    Join Date
    Dec 2015
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    Default Paying Off Debts With a Pro Rata Plan

    I am starting the Pro Rata plan with my unsecured creditors and wanted to know if anyone has every used this method and what your thoughts or outcomes have been?

    Quote Quoting Pro Rata Plan
    “Pro rata” means the fair share, or the percent of your total debt each creditor represents. This
    will determine how much you should send them when you cannot make the minimum payments.
    Even if you cannot pay your creditors what they request, you should pay everyone as much as
    you can. Send the check for their pro rata share, along with a copy of your budget and this form,
    every month. Do this even if the creditor says they will not accept it.

    Do you need to use the pro rata plan?

    First, use your monthly cash fl ow plan to determine your total disposable income. Simply write
    down your income on the line at the top of the form. Then, write down the total you spend on
    necessities (not including consumer debt) each month. Subtract the necessity expense from the
    income, and you are left with your disposable income. This is the money you have to put toward
    your debts.

    Second, add up your total amount of debt, not including your home, and write that in the blank
    provided. Below that, write in the total of the minimum monthly payments on all your debts. If the
    total of your minimum payments is greater than your total disposable income, you need to use the
    pro rata plan.

    For example, Joe and Suzie have a total debt of $2,000, with a combined total minimum payment
    of $310. However, this family only has $200 in disposable income each month, which means they
    do not have enough money to make the minimum payments. So, they will use the pro rata plan to
    give each creditor their fair share of the family’s $200.

    How to Use This Form

    This form has six columns:

    1. Item: the name and type of the account.
    2. Total Payoff: the total amount due on the account.
    3. Total Debt: the combined total of all your debts.
    4. Percent: the portion of the total debt load that each account represents. You can calculate
    this by simply dividing the Total Payoff by the Total Debt for each line.
    5. Disposable Income: the amount of money you have left after paying necessities.
    6. New Payment: the amount that you will now send to each creditor. You calculate this by
    multiplying the numbers in each line’s Percent and Disposable Income columns.

    The pro rata plan helps you to meet your obligations to the best of your ability. Of course, your
    creditors will not like receiving less than their required minimum payments. However, if you keep
    sending them checks, they’ll most likely keep cashing them. We have had clients use this plan,
    even when sending only $2, who have survived for year

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