To break free from debt, thousands of people make use of a Debt Agreement Administrator. Choosing the right one can have a big impact on the level of service you receive and the chance of your debt agreement being accepted, so it’s important to go in armed with some basic debt agreement knowledge.
What is a Debt Agreement?
A debt agreement is a proposal you make to your lenders (through a debt administrator) when you’re struggling with debt. Under the proposal, all the interest is frozen and you repay less than the full amount owed. You’ll usually end up repaying more than your lenders would receive from you in a bankruptcy, so for this reason a sound debt agreement application is often preferred by your lenders to a bankruptcy.
Which Debt Administrator should I choose?
The key to choosing the right administrator is to ask good questions. In many cases, people reach the end of their debt agreement before they’re familiar enough with the process to know what they should have asked.
To avoid falling into this trap, be sure to ask the following questions up front.
* Do my lenders have a history of agreeing to debt agreements? Your debt administrator will be aware of whether or not your lenders has a history of voting for or against a debt agreement. Many banks will agree to a debt agreement but some lenders won’t so be sure to press this point about your particular lenders when you call.
* Am I offering my lenders enough of a return? Each lender has different criteria regarding what minimum amount they want from you in your debt agreement (often 70% – 80%). Based on who you owe, your Debt Administrator must offer them this percentage for the debt agreement to stand a chance of being accepted. You need to ensure the offer they are putting forward is therefore realistic for the lenders you have – rather than a reduced offer that might secure your business but is not likely to be accepted by your creditors.
* Can I afford the repayments? In order for your debt agreement to be accepted, your lenders must be convinced that you can afford to live on what’s left over after your debt agreement has been repaid. Be ready to show that you can to your debt administrator and feel free to ask them what guidelines they are using to show that the debt agreement repayments do you leave you enough to live on.
* Would my creditors get more from me under a bankruptcy? If the answer’s yes, the debt agreement has almost no chance of being accepted, so you need to ensure your Debt Administrator has calculated your ‘bankruptcy rate of return’. To calculate this they’ll need to know your income and any major assets you own such as property, shares and vehicles.
If you can keep the above questions in mind when you make that first call to your debt administrator, you’ll give yourself the confidence that comes from knowing your debt agreement has the maximum chance of succeeding.
To speak with an experienced Debt Agreement administrator, visit www.debt-agreement.net.au.
Learn more about how a Debt Agreement Administrator can help you break free from debt. Visit our informative Debt Agreement website.