What is an Informal Debt Settlement?

2015-10-23   minute read

Frederic Lachance

Debt Solutions

An informal debt settlement of debts is essentially a voluntary proposal between you and your creditors without judicial surety or the step by step support that comes from working with a licensed trustee. Your creditors have no legal obligation to work with you in order to develop an agreement and may terminate such agreement in the short term or without notice if it is not properly recorded in a legally binding document.

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How an Informal Debt Settlement Works

To determine an informal debt settlement, you will first have to communicate directly with each of your creditors to negotiate a repayment plan that both fit your budget and that respect their repayment terms. Each creditor will want to negotiate the interest rates, payment amounts and the repayment schedule. You will then be responsible for the payment obligations under the terms of the voluntary agreement. The higher the amount of creditors is, the more difficult it can be to reach multiple agreements that will be financially manageable when all put together.

Deciding on an Informal Debt Settlement

Depending on your number of creditors and total amount owing in debt, an informal debt settlement might be a feasible option for you. If you are unsure about the risks associated with making an agreement that could have you juggling multiple payments and interest rates, with no legally binding paperwork to protect those agreements in the long term, there are other options available to you.

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