Informal Arrangement
What is it?
Where an individual has a small number of creditors and there is no immediate threat of legal action, it may be possible for them to agree an informal arrangement direct with their creditors. This could be of particular interest to individuals who do not wish a third party to be involved in their financial affairs on an ongoing basis.
Who is it for?
People
who have a small number of creditors who are in need of some breathing space
before paying. This is on the basis of no immediate threat of legal
action.
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The Process
Chamberlain & Co can provide guidance on the steps you need to take if you wish to negotiate directly with your creditors.
It should, however, be stressed that such arrangements are not legally binding and the creditors concerned cannot be forced to accept them. They may, therefore, continue with any legal action against you.
If you are not concerned about the involvement of a third party, you may wish to consider agreeing a Debt Management Plan, as a means of dealing with your debt.
Advantages
- The professional costs associated with an informal arrangement are not usually as great as those of a IVA
- You remain in control of your assets
- It may be possible to obtain your creditors' agreement to freeze any ongoing interest charges
Disadvantages
- Your creditors are not obliged to freeze the interest on your account; they may only do so for a limited period of time or only be prepared to charge interest at a reduced rate
- You will be required to ensure that your creditors are paid on an equal basis. You will need to calculate how much you can afford to pay in total each month and divide this equally, on a pari-passu basis, between your creditors
- It is likely that you will be required to repay your creditors in full over a number of years. It is possible that you will continue to pay them for some considerable period after a IVA would have finished. It is also possible that you will be required to pay greater contributions than you would wish
- You will remain responsible for ensuring that a monthly payment is sent to each of your creditors for the correct amount, unless you request an outside party to do this for you, who may charge commission for this service
- You will have no court protection and your creditors can, at any time, decide to issue a bankruptcy petition, obtain judgment or other legal process in respect of their debt
Other Options available
IVA , Debt Management Plan , Consolidation Loan
Call us on 0800 195 4585 for further details on 'Informal Arrangements'.
