Informal Debt Agreements
Informal Debt Negotiations is a process where a debt consolidation company negotiates privately with your creditors such as credit card companies to reach a new, legally binding, affordable payment arrangement for your debts.
Informal Debt Negotiations aim to:
- Consolidate your debt into one regular repayment
- Reduce your monthly payments
- Reduce your interest rate
- Make a more manageable plan for your debt so you pay what you can afford
Informal Debt Negotiations are carried out privately, outside of the rules of formal debt agreements and Bankruptcy. This means they won’t be marked on your credit file.
Informal debt negotiations are outside the formal system. With formal processes like bankruptcy, your credit is reduced and you may have trouble borrowing in the future, while informal agreements help you both now and in the future.
Success Story: Informal Debt Negotiations to get life back on track
Sharmane is a single mum of 2 teenage girls and works as a real estate agent. She earned roughly $72,000 after tax each year and owed $25,000 on a car and $560,000 for her family home worth $600,000.
In addition to these secured debts, Shanrmane owed $102,000 in unsecured debts across a number of credit cards and personal loans.
After a rough patch in the Real Estate Market, Sharmane had a drop in her commissions and fell behind with the repayments on her unsecured debts. She was struggling to make ends meet.
As a Real Estate Agent, Bankruptcy was not an option for Sharmane as that would have meant she would lose her job.
ReVIVE Financial recommended an informal agreement for Sharmane. They were able to negotiate with her creditors to accept a payment of $670 each fortnight towards her unsecured debts.
All future interest and fees were also frozen and Sharmane was left with one affordable repayment.
How to Enter Informal Debt Negotiations
Why use an Informal Agreement
This option may be available to you if your debt is overwhelming due to temporary extenuating circumstances. For instance, you might suddenly be unable to work, or your finances are in turmoil after a relationship break down.
These kinds of financial hardship can be negotiated with your creditors.
If your debt is more severe, you will still be eligible for other options, such as bankruptcy, which allows you to wipe part of your debt rather than paying the whole thing.
Informal Repayment Options
Informal Arrangements have flexible repayment options to suit a variety of different circumstances. Similar to a Formal Arrangement, your debt negotiators may be able to implement a repayment plan over a number of years.
You may also be able to combine an informal arrangement with a mortgage refinance and pay off a reduced debt amount with a lump sum settlement.
Speak to a Revive Financial Specialist to discuss your options.
The negotiations and informal agreement won’t be marked on your credit file. However if you were already in arrears with your debts before entering the agreement, your credit file might already be effected.
Yes. Once the negotiations are complete, you and your creditors are both bound by the new repayment arrangement. Your creditors can’t ask you for additional funds outside the agreed amount. You are also bound to make the agreed repayments. Failure to do so could see your original debts reinstated.