What are the pros and cons of an informal debt agreement and will they affect me as much as a debt agreement, personal insolvency agreement or bankruptcy?
What Is An Informal Debt Agreement?
What does an informal debt agreement between you and your creditors involve?
An informal debt agreement is an agreement between a debtor and a creditor that enables the debtor to pay off all or most of their debts and allows the creditor to recoup all or most of what is owed. It is similar to a debt agreement but without the legally binding process or impact on your credit score. A debt counsellor or manager talks to your creditors and negotiates with them on your behalf. By employing the help of a debt manager it is possible to reduce your debt level, reduce your interest level and come up with an agreement that is mutually beneficial to both parties. Get Out Of Debt Today offer debt counseling services and can arrange an informal agreement for you. We can also help with budgeting, with tailor made budget solutions for you. An informal debt agreement is a great way to avoid damage to your credit rating with no defaults or black marks.
Using a debt counsellor to come up with a proper debt settlement with your creditors can be highly advantages. They can get you a better deal than you may have gotten by yourself and the reduction in the amount of debt you have to pay could out do your expectations. This also means that you will be able to pay off your debt much quicker and hence be completely debt free in a short period of time.
Think of an informal debt agreement as a way for both parties to get the best possible outcome. On one hand you have your lenders who are looking to recoup what they have lent you. Once you fall behind on your payments, its bad news for them as they know they might not be able to recoup what they are owed. Saying that they will often be willing to settle for a lump sum that is part of the debt. This could be 80% or 90%, but the main idea is that they recoup money that they otherwise wouldn’t have.
On your end, this is advantageous for you as you are paying a much lower amount. This can also mean you get given time to come up with the amount you agree to pay back, giving you an amnesty period from paying off debts. This can be highly beneficial, giving you time to consolidate your debts, plan a budget and plan your next more with your debt counsellor.
Ways An Informal Agreement Can Help You
An informal agreement is a way to protect your credit rating whilst getting benefits from your creditors
There are a number of options available to you when entering an informal debt agreement:
As an act of bankruptcy, your creditors will be able to force you into bankruptcy if they don’t accept your deal. This cannot happen until after the meeting between yourself, your administrator and the creditors.
You can ask for an extension on paying back your debts if you think it will be only be a short term problem.
You can make a reduce payment, which helps signify your intent to pay off the debt. If your debt lasts longer than you thought, then you may have to enter a formal agreement.
Offer a debt reduction offer, which is where you offer a lump sum less than the total amount of debt. The creditor will usually accept this as complete payment of the debt if they think it pays off enough of the debt.
Get a waiver on the debt for a period of time. Ask for time to find the money to help pay off the debts, which a creditor will often accept if it is clear you have no way of paying off the debt.
Negotiate a reduction of interest if you are unable to keep up with debt payments.
An informal debt agreement can lead to a number of possible outcomes. The most important thing an informal debt agreement allows and the reason they are so popular is that you are able to keep your credit rating the same and you will not be listed on the National Personal Insolvency Index. You also won’t be forced to tell anyone that you have been in debt like with bankruptcy, part 9 debt agreements and personal insolvency agreements.
Forms of bankruptcy can have a serious impact on your life long after you have finished paying off your debts. It is unfortunately true that bankruptcy and debt agreements can reduce your ability to work, borrow and own a business. Bankruptcy situations also have very strict laws that can leave you in a bad way, ending with selling off assets you didn’t think you would lose. Because of the ways bankruptcy can negatively affect your life, an informal debt agreement can be a much better option, especially if your debt isn’t completely rectifiable.
What The Difference Between A Part 9 Debt Agreement And An Informal Agreement?
There are massive differences between these two types of debt agreements
There are a few difference between these two types of agreement the main one being that one in enacted in the court of law, while the other is done between the two parties. An informal agreement can be formed into a document that is legally binding though this isn’t always necessarily the case. In a debt agreement, both parties are tied to the conditions of the agreement by law, whilst and informal agreement is often an agreement between two parties about how much they agree to pay and in what form. It is not legally binding and is hence a risk if your creditor isn’t trustworthy. With a debt agreement, your credit rating will be affected for five years and you will be placed on the National Personal Insolvency Index. With an informal agreement however this is not the case, you avoid defaults and black marks against your credit rating which is why it is often a popular choice.
An informal agreement is often used in less serious cases where you need time to come up with the funds or your situation will soon return to normal. A debt counsellor will help you negotiate the deal, talking with your creditors and coming up with the best option for you. They will also help you plan and budget, often getting you time to save so you are able to pay your debt in one lump sum, which is often less than the actual amount owed. This option is also a lot cheaper than a debt agreement which has fees for administrators, forms and legal fees. It’s also important to remember that a debt agreement is an act of bankruptcy and will seriously affect your ability to borrow in the future.
A debt agreement is for much more serious cases, where your unable to pay your debts due to cash flow problems or having all your equity tied up in assets. If you are unable to come to a solution with your creditors through an informal agreement a debt agreement is a much more serious way to pay off your debts and if this is also rejected, your creditors can force you into bankruptcy. The good thing about a debt agreement is that it is legally binding and your creditors are not allowed to pursue you any more, though they usually stop when you have an informal agreement as well. You can find out more about debt agreements here.
Which Agreement Is Right For Me?
What should you choose and which debt agreement will benefit you more?
Which form of getting out of debt suits you best? We can help you answer that question by assessing your financial situation and coming up with a debt and budgeting plan with the aim of getting your debt reduced as soon as possible. Informal debt agreements are not for everyone and a more formal form of debt elimination such as bankruptcy might be required, however, this would only be a last resort. There are a number of ways to get out of debt, call us today and get a free consultation with a debt counsellor.
An informal debt agreement can have great benefits if it is negotiated properly and in good faith. This is why it is important to talk to a debt negotiator as they can often secure these benefits for you, having the experience in dealing with stubborn creditors and lenders.
Talk to Get Out Of Debt Today to find out the options available to you. Every person and every debt situation is different, which is why it’s important to choose the right way to reduce your debt or you could end up further in debt. We attempt to avoid all forms of bankruptcy including debt agreements to ensure you don’t get a default or black mark on your credit rating. We want to protect your credit rating, which is why we explore all other options to find the best one for you. You don’t have to enter bankruptcy in order to get out of debt, call us today on (02) 9011 7919 or fill out or form and we can contact you!
Consolidate Your Debts | Talk To A Debt Counsellor Today
Talk to a debt counsellor today about a debt consolidation through a mortgage refinance or personal loan. Lower your debt amount and interest rate and start living your life debt free again! Call today on (02) 9011 7919 or fill out our form.