Informal Debt Agreements

An Informal Debt Agreement is a legally binding agreement between yourself and your creditors negotiating personalised terms to help you manage and pay back your debts. They come with fewer consequences than other more formal debt relief options such as Part 9 Debt Agreements or Part 10 Debt Agreements (Personal Insolvency Agreements).

In an Informal Debt Agreement, we help you negotiate repayment terms that are suitable to you and your creditors. In these agreements, we often negotiate:

• to freeze your interest
• reduce or remove fees such as overdue and late payment fees
• a settlement period and repayment rate that is affordable.

In some circumstances, we may even be able to negotiate to reduce the debt owed.

Whether an Informal Agreement is right for you will depend on your personal circumstances. Informal Debt Agreements are ideal in situations where you suddenly find yourself in a small amount of debt due to a change in your life circumstances. They’re suitable as a short-term debt solution or in situations where a formal solution might negatively impact your ability to keep your job.

Situations in which an Informal Debt Agreement might be suitable are:

• Loss of employment
• Sudden illness or injury
• An unexpected change in your personal circumstances, such as being separated or getting a divorce.

Informal Debt Agreements can assist you with a range of debts including secured debts such as car loans, and unsecured debts such as credit cards, personal loans, and government debts, for example, utilities and telecommunications bills, medical bills, speeding fines and even tax liabilities.

Unlike formal Debt Agreements, Informal Agreements don’t have any limitations on them. They don’t come with negative impacts on your credit rating (they aren’t formally recorded in your credit file) and they aren’t publicly noted on the National Personal Insolvency Index (NPII) as they don’t fall under the Bankruptcy Act.

Other benefits are that they:

• stop debt collection calls
• could freeze debt related interest and fees
• don’t impact your ability to manage a business or be a Company Director
• don’t have to include all your creditors.

You do need to stick to the agreement and make your repayments on time to receive the benefit of having one. Should you default on your payments, your creditors can and will commence their process of debt collection.

An Informal Debt Arrangement is not regulated by Australian Legislation, which means that creditors are able to change your terms during the agreement, they may want to renegotiate regularly and there are no standardised terms which are legally required. You may find it hard or almost impossible to persuade your creditors to enter into an Informal Agreement with you.

Whether an Informal Debt Agreement impacts your credit rating or not will depend entirely on your creditor and whether they choose to record your informal arrangement with the credit reporting agencies or not.

Depending on your personal circumstances, an Informal Debt Agreement may not be the most suitable debt relief option for you. Alternative solutions may include:

• Debt Consolidation
• Home Loan Refinancing
• Formal Debt Agreements (Part 9 or Part 10).

Speak to our team and let us help you assess what the best options are for you.

Although you could approach your creditors directly and ask if they’d be willing to enter into an Informal Debt Arrangement with you, we don’t generally recommend it. Using an experienced and well-connected Debt Negotiator who has a clear understanding of the law and what is required to make an Informal Agreement successful is highly recommended. At Debt Negotiators, we have the connections, experience and knowledge needed to help you develop and propose a successful Informal Debt Agreement. We also have the expertise to help you assess your options so you choose the best debt solution for your current financial situation.

The cost of a debt payment plan will depend on the details and support included in your debt payment plan. For example, negotiating a payment plan with five lenders will cost less than negotiating a payment plan for ten debts. Contact us to discuss your payment plan needs and we’ll be able to give you some indicative pricing.