Will I still have to pay back everything I owe if I use a debt agreement?
When you decide that a debt agreement is the right route for you, you have to designate a trustee to take care of your affairs. Your trustee begins helping you from the proposal and throughout the time in which you pay back your creditors.
First of all, the debt agreement is an agreement between you and your creditors that you determine how much of a debt you will pay back and the time period concerning the repayments. The whole reason for the agreement is because you cannot afford to pay the entire amount of the debt. In other words, you have been deemed insolvent. When you are insolvent and you need to submit a debt agreement proposal, you are registered on the National Personal Insolvency Index for life. This is in addition to the fact the debt agreement is listed on your credit report for seven years.
As for what you have to pay back, that is dependent upon what your creditors agree upon. In some cases, you may find that your debt has been considerably reduced. The debt agreement is an effort for you to be able to pay back the debt in a way that you can afford.
What you will do is submit a payment to your trustee as agreed and your trustee will pay the dividends to your creditors in order to settle the debt according to the agreement.
Basically, you are able to do this as a step to avoid bankruptcy. Your proposal says to your creditors that they are better off to allow you to pay a certain amount on the debt than to disagree and force you to file bankruptcy. If you file bankruptcy, they lose any possibility of collecting any of the money that they are owed. The debt agreement states that it is better for them to receive some of the money than none at all. You need the majority dollar value of your creditors to agree to the proposal.
So no, you do not have to pay back everything. However, you have to make sure that your proposal is reasonable so that your creditors will agree to it. They have to really see that they are in a better position in order to agree. After that, you can start resolving your debt. Just keep in mind that your debt agreement remains on your credit report for a period of seven years.
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