Debt Relief: Debt Agreement vs. Bankruptcy

When you’re drowning in debt, you have a few relief options. Two of the most common options are declaring bankruptcy or entering a debt agreement.

But which solution is right for you? Today, we compare a debt agreement and bankruptcy.

Debt Agreement

A personal debt agreement is an agreement between you and your creditors. It is a flexible way to pay off debt without filing for bankruptcy.

You can negotiate to pay an affordable percentage of your combined debt. Instead of paying to your creditors, you pay to your debt agreement administrator. Additionally, the interest will be frozen.

After you complete your payments, creditors can’t collect the rest of the money you owe. If you don’t qualify to file for bankruptcy, a debt agreement is the best solution.

However, there are limits to debt agreements. Depending on your income and amount of debt, you may not be eligible for a debt agreement.

Bankruptcy

Filing bankruptcy may seem like the easier solution to your financial woes, but it may not be suitable for you. Bankruptcy does come with certain restrictions, and your assets may be seized.

When you declare bankruptcy, you will have a trustee manage your debts. They will own your property and assets and be in control of how it is distributed to creditors.

If you have assets you want to hold on to, bankruptcy may not be the right solution for you. Things like jewellery, money in financial institutions, stocks, shares, and other assets will be transferred to your trustee.

Declaring bankruptcy also has long-term effects. Bankruptcy will be visible on your credit report for 5 years but will stay on the National Personal Insolvency Index forever.

Which is Best For You?

Bankruptcy and debt agreement help relieve some of the financial burdens, but they come with their own positives and caveats.

Debt agreements allow you to pay off your debt while keeping your assets. However, a debt agreement only applies to unsecured debts. Also, there are limitations on how much debt you can claim.

Bankruptcy makes paying down debt manageable, but it requires you to relinquish your assets. It also prevents you from operating a business and travelling overseas without permission of your trustee.

Your financial situation is unique, and it calls for the perfect solution. Our professionals are here to help.

To speak with an experienced debt consultant about declaring bankruptcy or arranging a debt agreement, contact us.