A debt agreement is a last resort measure to help you get out of debt while avoiding bankruptcy. It is designed for those who have become incapable of repaying their unsecured loans. In order to enter into a loan agreement, you must compile all of your existing unsecured debt and determine the total amount that you can afford to pay each week, after your general living expenses and payments for secured debts, like your home and car loans. You will then submit a debt agreement proposal to your creditors identifying how much you can afford to pay.
Your creditors will then have the option of accepting or rejecting your proposal. If a majority of your creditors (by loan value) accept your proposal, all of them will be bound under it. You will make the repayments as specified in the agreement, with a portion of each repayment going to each of your creditors, until the end of the agreement term.
When you enter into a debt agreement, you will only have to pay an amount that you can actually afford without having to starve yourself. Your payments will remain the same for the duration of the agreement, and there will be no interest charges or hidden fees on your accounts. Once you have completed the agreements, the remainder of your unsecured debt will be forgiven. Many creditors are willing to accept a lower amount than what you actually owe them because they would likely receive no money at all if you were to lodge bankruptcy. Lastly, you’ll stop receiving calls and letters from debt collection agents as soon as your debt agreement proposal is accepted.
In order to enter into a debt agreement, you must:
Have after-tax income below $82104.75 and owe less than $109473.00
Not have been bankrupt or entered into another debt agreement within the past 10 years
Be incapable of making your current required debt repayments
A debt agreement will cover all of your unsecured debt. This includes credit cards, store cards and some personal loans. It will not, however, cover secured debts. Secured debts are backed by some sort of property, like your home or car. For these types of debts, you will still need to make any required repayments outside of your debt agreement. Child support payments also do not qualify under a debt agreement.