Informal debt settlement, often termed as a voluntary debt agreement, is an arrangement negotiated directly between the debtor and the creditors. While this approach lacks the legal binding and guidance of a Licensed Insolvency Trustee, it serves as a potential alternative to bankruptcy.
Understanding Informal Debt Settlement
An informal debt settlement is a self-negotiated agreement where you communicate directly with your creditors to establish a repayment plan. However, its voluntary nature implies that creditors are under no legal obligation to agree to, or maintain, the settlement unless properly documented.
“Your creditors have no legal obligation to work with you on creating a debt agreement and they could cancel it with little or no notice if it is not properly documented in a binding legal document.”
How It Works
The Procedure
The process of informal debt settlement involves a series of steps:
Contact your creditors: Initiate the process by contacting each of your creditors. Discuss your financial situation honestly and propose a repayment plan that fits your budget.
Negotiate the terms: Each creditor will want to negotiate the interest rates, payment amounts, and schedules separately.
Document the agreement: Once a mutual agreement is reached, document it properly as a binding legal document.
Maintain the payment schedule: Adhere strictly to the payment obligations according to the terms of the agreement.
Challenges of Informal Debt Settlement
Dealing with multiple creditors can be challenging, as each agreement needs to be managed separately. The more creditors you have, the more complex it can be to negotiate and manage all these agreements.
Deciding on an Informal Debt Settlement Agreement
If you’re unsure or uneasy about the risks associated with informal debt settlements, it’s advisable to consult a Licensed Insolvency Trustee. They can help you understand all your options and guide you in making the best decision.
Conclusion
The decision to go for an Informal Debt Settlement should be made after careful consideration of your financial situation, the risks involved, and the potential benefits. Always remember to document the agreement properly and adhere strictly to the payment obligations to avoid any legal issues.
Remember, “Life-Changing Debt Solutions is about finding the best choice that will work for you.” So, take your time, weigh your options, and choose wisely.
