Entering into a Debt Agreement

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    Entering into a Debt Agreement: What You Need to Know

    Dealing with debt can be a daunting and stressful experience, but there are options available to help you get back on track. One such option is entering into a debt agreement, which allows you to make manageable repayments while also protecting you from further legal action from your creditors.

    If you are considering entering into a debt agreement, there are a few important things to keep in mind. Here are some key points to consider:

    What is a Debt Agreement?

    A debt agreement is a legally binding agreement between you and your creditors that sets out a plan to repay your debts over a period of time. The agreement is overseen by a registered debt agreement administrator, who will work with you and your creditors to come up with a repayment plan that is manageable for you.

    Benefits of a Debt Agreement

    One of the key benefits of a debt agreement is that it provides immediate relief from creditor harassment and legal action. Once the agreement is in place, your creditors are no longer able to take legal action against you or your assets, which can provide significant peace of mind.

    Another key benefit is that you only need to make one regular payment to your administrator, who will then distribute the funds to your creditors on your behalf. This can be particularly helpful if you have multiple creditors and are struggling to keep track of your repayments.

    Finally, a debt agreement can also help to preserve your credit rating. While entering into a debt agreement will be noted on your credit report, it is generally viewed more favourably than bankruptcy or defaulting on your debts.

    Considerations Before Entering into a Debt Agreement

    While entering into a debt agreement can be a great way to manage your debts, there are some important considerations to keep in mind before making the decision to do so. Here are some factors to consider:

    – Eligibility: Not everyone is eligible for a debt agreement. To be eligible, you must have unsecured debts of less than $118,200 (as of July 2021) and be unable to pay your debts when they are due.

    – Creditors: All of your creditors must agree to the terms of the debt agreement before it can be put in place. If any of your creditors do not agree, it may not be possible to enter into a debt agreement.

    – Payments: While a debt agreement can provide relief from creditor harassment and legal action, it is important to remember that you will need to make regular payments to your administrator. If you are unable to make your payments on time, the debt agreement may be terminated.

    – Credit rating: While a debt agreement can help to preserve your credit rating, it will still have an impact on your credit report. It is important to consider the potential impact on your credit rating before entering into a debt agreement.

    Final Thoughts

    Entering into a debt agreement can be a helpful way to manage your debts and get back on track financially. However, it is important to carefully consider your options and any potential risks before making a decision. If you are unsure whether a debt agreement is right for you, it may be helpful to speak with a financial counsellor or seek advice from a registered debt agreement administrator.