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Debt Agreement – An Alternative to Bankruptcy

12th May, 2009 - Posted by admin - No Comments

If you are looking for alternatives to bankruptcy then a debt agreement could be just what you need. Rising interest rates and the sub-prime housing crisis in the US has put many people in crisis worldwide. More and more people are struggling to meet their mortgage payments and loans, and are looking at alternatives to get out of debt and avoid bankruptcy.

A debt agreement is an agreement where you can formalize an agreement to pay the sum total of your debts off at a specific rate and time. In recent times debt agreements have become more widely used as they give low income earners the flexibility to pay off their debts at a much lower cost compared to dealing with bankruptcy. It takes financial pressure off households and helps people to build self-confidence and get back on their feet.

A debt agreement gives low paid workers with small debts and few assets the opportunity to get out of debt. If you are having financial problems and want an alternative to bankruptcy then seek advice. Ask a financial counselor, a debt agreement administrator or a friend to help you develop a full debt agreement proposal. Your proposal is then submitted to the Insolvency and Trustee Service Australia (ITSA) along with a statement of your finances. ITSA assesses the application and calls the creditors to a meeting if it considers the proposal is in their best interests to discuss the matter further. Creditors vote and a majority of the creditors must accept a debt agreement for it to be successful. The monetary aspect must represent at least three quarters of the value owed to all those voting. If the debt agreement is successful, you are released from all debts under the terms of the debt agreement. If a creditor voted against the proposal, no recovery action can be taken by that creditor as that is outside the terms of the debt agreement.

In recent years, more people are choosing to take out a debt agreement to avoid bankruptcy. A debt agreement is a better option for some people as you can stay in charge of your own finances, keep your assets and there is less damage to your credit rating.

It is usually in a debtor’s best interest to agree to a debt agreement as they will recover more of the debt than if you declare bankruptcy. Usually under a debt agreement, a creditor will recover about 80 cents in the dollar compared to 50 cents or less in the dollar if you file for bankruptcy. Yet about 40% of debt agreements fail due to debtor default. Some think the use of debt agreements more freely may encourage households to increase their debt as it is does not cost so much to just walk away. But by allowing more flexibility, especially for low income earners, a debt agreement can make life easier for you while you get you financial affairs in order. This takes a lot of stress off your family, working life and, in general, your proactive approach to solving your financial problems will empower you. Now get out there, research financial counselors in your area and make an appointment to discuss your options.

Growing numbers of Australians use a debt agreement to tidy up their financial mess. Learn how to not only reduce your debt, but pay it out faster. See the info at: http://debtmediators.com.au and never be afraid of your creditors again…

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