Informal arrangements are agreements between you and your creditors that are not bound by legislation or formalised by contract.
How does an informal agreement work?
In an informal agreement, you contact your creditors and ask them to agree to accept regular lower repayments towards all or part of your debts. It is possible to negotiate an arrangement with your creditors that will reduce your debt level or make a repayment plan that is mutually beneficial.
What are the risks involved in an informal agreement?
As the agreement is not legally binding, your creditors don’t have to accept your informal agreement and can cancel it at anytime. Your creditors can still contact you and take court action such as applying for a Charging Order over your property which may place your home or assets at risk.
How much does setting up an informal agreement cost?
There is no cost to set up an informal agreement but small repayments may not cover any interest or charges. If this happens, the amount of debt you have to repay and the time it takes to pay it off can increase.
How do I set up an informal agreement?
You can set up an informal agreement yourself, but you should make sure that it is the right way to deal with your debts. To set one up and make sure it’s the right way to deal with your debts, get free help and advice from organisations like Citizens Advice or AdviceNI.
Setting up an informal agreement yourself involves firstly, working out a budget to show how much you can afford to pay your creditors each month after all your essential living costs have been accounted for. The second step is to write your informal agreement, outlining how much you can reasonably afford to pay and over what time frame. The third step is then to write to your creditors, explaining your situation and asking them to accept your informal agreement.
What are the benefits of an informal agreement?
You will be responsible for administering all the payments yourself to each of your creditors but there is the advantage of minimising costs with no third-party management fees to be paid or Court costs. You can also re-negotiate your payments at any time.