Informal Arrangements

Seeking financial assistance to meet financial needs has become quite common. Mortgages and loans have, until recently, been relatively easy to obtain, helping to meet the rising cost of living and maintaining a high standard of life. Other costs, such as a wedding or the purchase of a car, are often met by borrowing additional money. It is important that the monthly repayments on any credit agreement are paid in order to avoid any action from your creditors and subsequent impact on your credit file. If you are likely to miss repayments, for whatever reason, you must contact your creditors. Depending on your circumstances, there are three options available – Bankruptcy, an Individual Voluntary Arrangement, or an informal arrangement / debt management plan.

Informal arrangements are not backed or regulated by the government; however they are often the method of choice for the creditors. As there is no regulation, and by the very nature of the arrangement, your creditors are under no obligation to accept the arrangement and can withdraw from it at any time. Informal arrangements often last for much longer than bankruptcy or an IVA, both of which are regulated, and present the creditor with no obstacle to increasing interest rates or charges.

Informal arrangements are basically settlements between debtors and their creditors that are conducted informally without any legal procedures. In many cases the debtor will agree to repay the total value of the debt, but over a longer period. In many cases, the creditors may reduce interest charges or even the value of the debt, however neither of these situations is guaranteed.

The best advantage of informal arrangements is that the courts need not become involved. This enables informal arrangements to be set up very quickly and can be for both the long and short-term, depending on your circumstances.

You can make an informal arrangement yourself; however you may have more success, and strike a better deal, by using the services of a Citizens’ Advice Bureau or debt advice charity.