What is the difference between a debt agreement and bankruptcy?
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There are several different ways to resolve debt. Two of those ways are the debt agreement and bankruptcy.
The debt agreement involves reaching an agreement with creditors to settle a debt. This means that you still have to pay on the debt, but you may pay less than the original amount owed. This is so you can pay off the debt faster and in a way that doesn't break the bank. The idea behind a debt agreement is so that you can pay off your debts comfortably. If you want to, you can also give the creditor property to satisfy part or all of the debt. It is entirely up to you.
Nevertheless, a debt agreement is you paying back your debt voluntarily. You are agreeing to satisfy the debt.
When it comes to bankruptcy, this is a discharge of all debts that qualify for bankruptcy. The process can be rather daunting and this is something that shouldn't be done unless you absolutely have to. The bankruptcy process usually takes about 3 years from the date a statement of affairs is followed. It can go as long as 5 to 8 years if there is a lack of cooperation or documents are not provided. It is after the bankruptcy has been discharged that it remains on your credit report for 7 years.
When it comes to bankruptcy, some of your assets may be seized to satisfy some of the debt. This is not voluntary. You also have to watch how much you acquire in assets in the future or the difference between what you have and what you are allowed to have may be seized to satisfy more of the debt. With a debt agreement, there is no limit to what you can have asset-wise.
If at all possible, try to go for a debt agreement before you go for a bankruptcy. This is because the debt agreement doesn't take away some of the freedoms that bankruptcy does. Some of the freedoms that are compromised include your asset restrictions, employment prospects, being able to rent property, and being able to travel outside of the country. A debt agreement doesn't apply any restrictions similar to this.
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