If you are finding it hard to repay all your debts in time and aren’t ready to file for bankruptcy, then a debt agreement could save you big time. A debt agreement can be used to woo creditors to accept a certain set amount of money (that one can afford), and then repay the remaining amount based on one’s capacity and income level. This agreement is legally binding, meaning you have to keep your word to avoid defaulting or the creditors filing for insolvency/bankruptcy. You however have to be eligible to use debt agreement as a way to buy more time to pay debts.
Many factors however have to be considered when filing for a debt agreement with creditors. Discussed below are some of the consequences of Debt Agreement that you should have first-hand information about.
- All pending or current legal actions to recover debts are suspended once you lodge the proposal, and it’s accepted. The AFSA however has to start processing the lodge immediately for it to be effective. Once AFSA accepts the agreement application, then all these legal actions are automatically cancelled.
- You can keep all your financed assets for as long as the pending payments are paid in time. This is because secured creditors won’t be affected once AFSA has approved the application.
- Debt agreements do not come with most of the restrictions that come with filing for bankruptcy. This is to say you can still travel the world and visit friends on the other side of the world without creating any suspicion.
- Regardless of your creditors’ demands, you get to choose how much the repayments will be. This however has to be based on your capacity and what you can afford as repayment. The new repayment plans are devised to suit your existing financial commitments and liquidity.
- The National Personal Insolvency Index records all your financial information and personal details, which is shared with almost all credit reporting agencies. This means you may not be able to borrow or apply for some time (mostly for 10 years or until you have repaid all debts). The sad thing about this is, these records remain there till the end of time.
- Although protected from unsecured creditors, secured creditors may choose to seize or even sell any of your personal assets to recover debts. This however mostly happens if you (the debtor) had offered the assets (car, house, etc.) as security when applying for the loan. Although the agreement cancels any legal actions from unsecured creditors, the debtor is only free after he/she has completed all payments and obligations as agreed.
- Jointly owed debts cannot be handled through debt agreement, as only one party will be viable to apply for the same.
Based on the facts discussed above, a debt agreement is considerably one of the best ways to deal with massive loans. Nonetheless, you may need financial insight and advice from financial advisers before taking this route. The financial adviser, or even an attorney, should be able to help you make the best decision to safeguard your future financially.