No matter how it happens, Australians all across the country can find themselves in financial trouble. Whether it is a missed credit card payment or more significant problems, good professional advice and assistance can help people get back on their feet.
Oftentimes, people will enter official debt agreements with creditors, but find themselves unable to meet the payments. When people need a more flexible restructuring of their debt to avoid bankruptcy, an informal arrangement provides the ideal solution.
How does an informal arrangement work?
Essentially, an informal arrangement involves negotiations with your creditors regarding the amount and timing of payments you make to them. An insolvency specialist can act on your behalf in these negotiations and bring value with their professional understanding and ability to help your creditors understand your circumstances and the available options. It occurs in a few steps:
- Contacting your creditors for a stay of action until a proposal can be made,
- You provide your adviser with details of your income, assets, liabilities, personal circumstances and background,
- An assessment is made of what you can afford to pay and you decide on what you can offer creditors,
- Creditors are given a letter detailing your settlement proposal, circumstances and expected outcome in bankruptcy, so they can assess whether its in their interests to accept your offer,
- There may be further discussions and negotiations with creditors until resolutions are reached which all creditors.
If successful, informal arrangements can help you avoid bankruptcy or a debt agreement, meaning you avoid the restrictions of these and there is no formal record on your credit rating. This can allow you to retain any company directorships you hold, as well as protect important assets like the family home.
Who can enter informal arrangements?
An informal arrangement means multiple creditor negotiations, all of whom might have different debts owed. For this reason, the fewer creditors you have, the greater chances an informal arrangement has of succeeding. Generally, six or fewer creditors is ideal, however we have assisted clients with up to 15 creditors. Beyond that, a formal engagement such as a debt agreement or personal insolvency agreement may be more appropriate.
People seeking to enter these debt negotiations must also be able to offer some payments to their creditors, either through realising assets, future income or from friends or family. Some organisations, like the Australian Taxation Office, will not negotiate to reduce the amount of their debt, however they will often accept instalments over time.
Informal arrangements can be used to negotiate debts well in the hundreds of thousands of dollars, across multiple lines of credit, personal guarantees or other claims. If you are liable for personal guarantee debts, or have seen your company go into liquidation and want to avoid bankruptcy, an informal arrangement can offer a way out.
What are the benefits of an informal arrangement?
In addition to avoiding bankruptcy, informal arrangements carry many benefits that are specific to this type of debt negotiation. It is cheaper than a personal insolvency agreement, which means you avoid many costs associated with this process.
It can also be a very quick process. If you have available funds to offer immediate settlement payments to creditors, you may have your situation resolved within a matter of weeks. Creditors won’t always accept your first offer to them, but as insolvency professionals we can help them understand the likely financial outcomes for them under the various available options. Generally speaking, you you will not make any settlement payments until all creditors have agreed to accept settlement offers proposed.
Because we work on your behalf, the initial offering and payment periods are also set based on your means and needs. Rather than meeting the demands of creditors, we mediate and ensure that creditors understand your situation and are treated equally. Creditors will also get better returns than if you were to go bankrupt, even though the full amount of debt may not necessarily be paid.
The process is also not recorded under the National Personal Insolvency Index or your credit record. This means your circumstances are confidential and there is no public record of your arrangements.
Taking the stress out of debt negotiations
Struggling with personal debts, or facing the prospect of going bankrupt is an uncertain and stressful time for anyone. By getting professional assistance to help manage your financial troubles, you can avoid the worst of it. At Cactus Consulting, we understand the various alternatives to bankruptcy, and work on your behalf to relieve the stress of dealing with your creditors.
Working with us to put affordable settlement proposals in place, you can take the time you need to reorganise your finances, pay creditors in a way that suits you, and move on with your life.
Falling into significant debt problems does not have to be the end of your credit integrity. To avoid bankruptcy and regain control of your finances, get in touch with us to discuss whether an informal arrangement is right for you. Even if you simply want a representative to open talks with creditors or to discuss your repayment options, we can help. Getting someone on your side for creditor negotiations can make all the difference in the outcome.