9 Debt Agreement

When it comes to managing debt, a debt agreement can be a lifeline for those struggling to make repayments. A debt agreement is a legally binding agreement between a debtor and their creditors, outlining a plan to repay debts over a prescribed period of time. While there are several types of debt agreements available, the most common is the Part IX Debt Agreement. Here are nine things to know about debt agreements:

1. Eligibility: To be eligible for a debt agreement, the debtor must have unsecured debts of less than $118,250, have sufficient income to make regular repayments, and cannot be bankrupt.

2. Creditors: A debt agreement must be accepted by the majority of a debtor`s creditors, representing at least 75% of the total debt.

3. Repayment plan: A debt agreement outlines a repayment plan, which may include a lump sum payment, regular repayments, or a combination of both.

4. Interest and fees: Once a debt agreement is accepted, all interest and fees on the debt are frozen, and creditors cannot take legal action against the debtor.

5. Credit rating: Entering into a debt agreement will negatively impact a debtor`s credit rating, making it harder to obtain credit in the future.

6. Fees: Debt agreement administrators charge fees for their services, which can be included in the repayment plan.

7. Property: Debt agreements do not affect secured debts, such as mortgages or car loans, and creditors can still repossess secured assets if the debtor defaults on payments.

8. Length of agreement: Debt agreements typically last for three to five years, depending on the individual circumstances of the debtor.

9. Consequences of non-payment: If a debtor fails to make repayments under a debt agreement, creditors can resume legal action and the debtor may be forced into bankruptcy.

While debt agreements can be a useful tool for managing debt, they are not a cure-all solution. Debtor`s should consider all options and seek professional advice before entering into a debt agreement. If you are struggling with debt, reach out to a debt counselor or financial advisor to explore your options.