Here at Get Debt Free, we always recommend that you first approach your creditors and attempt to have your debts rescheduled with an informal agreement (ie that is without our formal intervention). We find that an informal agreement is usually successful if you only have one or two creditors.
If you have more than two creditors then we find an informal arrangement can be problematic as reaching agreement with more than two creditors is usually difficult to achieve.
The advantages of an informal agreement is that your credit record shouldn’t be effected (unless a creditor has already placed a default on your file). We strongly recommend that if you are successful in negotiating an informal agreement with your creditors, then you must stick to it. If you cannot afford what your creditors want, then don’t agree do it! – as it could lead to a worse outcome. Agreeing to something that you cannot afford will only make our job harder if you then want to enter into a formal debt agreement. Furthermore, if you don’t stick to the repayments you agreed under your informal agreement, then the creditors may lose patience with you and attempt to recover their debt via the bankruptcy courts.
The disadvantages of an informal agreement, is that it does not bind your creditors to the agreement (as they are not usually legally binding on any parties unless it has been properly documented by a solicitor). In other words your creditors could demand full repayment of debt at any time. The risk of your creditors doing this increase significantly if you miss a payment or you are constantly late with payments.
If you are considering an informal debt agreement call us first and we will be able to give you free advice as to whether that will be in your best interests. Call today on our free advice line 1800 98 10 70.