A increasingly popular debt relief option for many is that of a Informal Debt Agreement. This allows you to negotiate your debts and repayments without the legally binding documentation that lands your name on the National Person Insolvency Index (NPII).
If you are having trouble paying down your debts, feel inundated with collection calls, or have to resolve debts with multiple creditors, you might consider negotiating an informal debt agreement. We’re going to look at the most frequently asked questions about informal debt agreements and shed some light on how they are beneficial. Dealing With Debt has provided a quick checklist on FAQs on informal debt agreements.
- What’s the difference between an Informal and Formal Debt Agreement?
- What if a creditor doesn’t accept my agreement?
- Can an Informal Debt Agreement affect my credit score?
- Are there any debts that are excluded from an Informal Agreement?
- How can I make payments with my Informal Debt Agreement?
- Is there a limit to the amount of debt that I can negotiate in an Informal Debt Agreement?
What’s the difference between an Informal and Formal Debt Agreement?
The key differentiation between Formal and Informal Debt Agreements is that a Formal Debt Agreement is managed through the Australian Government, whereas Informal Agreements are negotiated independently.
Informal agreements do not appear on your credit report, unlike formal agreements. They also are not binding- meaning the creditor may still choose to take further legal actions against you. Creditors are not required to accept your debt agreement.
If you have a job or professional license, you may find that they are affected by a Formal Agreement because of its impact on your credit rating.
What if a creditor doesn’t accept my agreement?
Because creditors are not required to accept any informal agreements, you may find that they choose not to accept yours. If so, you’ll still be required to maintain your minimum repayments with the creditor.
Can an informal debt agreement affect my credit score?
No. Once you create an arrangement with your creditor, your responsibility will lie in maintaining your payments according to your arrangement. If you miss any payments, the creditors may begin the process of collections. If you’ve previously had any defaults on your account that have made it to your credit rating, the informal agreement will not remove them from your report.
Are there any debts that are excluded from an Informal Agreement?
Fortunately, no. Formal Debt Agreements only apply to unsecured debts. Your Informal Agreement, however, can include all debts. This can be secured and unsecured debt, Centrelink payments, joint debts, business-related debts, and more. All that’s required is that your creditors accept the terms you propose for how you intend to make repayments under your specific circumstances.
How can I make payments with an Informal Debt Agreement?
It’s common for you to set up a direct debit from a bank account that will serve as a singular payment, which covers all the debts that are listed and covered in your Informal Debt Agreement. They are created to be affordable payments that come out in conjunction with your pay schedule.
Is there a limit to the amount of debt I can negotiate in an Informal Debt Agreement?
This is another flexible option with Informal Debt Agreements. There isn’t a limit to how much debt is covered when negotiating these terms. There is no minimum amount of debt required to qualify for an Informal Agreement, and there is no maximum amount that would exclude you from this option.
We know that sometimes debt becomes unmanageable and overwhelming. Explore your options and get on track.