Life is full of unexpected changes such as job loss, health and family emergencies. So, one might suddenly find themselves in financial hardship, and that easy to manage weekly or monthly payment become increasingly difficult to meet.
This is the time when one’s credit can turn into bad debt, and no matter what they do, their income isn’t enough to cover the bills. Friendly debt providers become debt collectors demanding to be repaid.
But thankfully, there are ways out to this difficult financial situation the most effective one being a debt agreement. This legal instrument is designed to provide debt relief to people struggling with unmanageable debt. The creditor allows the debtor to renegotiate their situation.
The debtor makes an offer to repay their current unsecured debts over an agreed period based on what they can afford and not what is owed. The creditor on the other hand agrees to freeze the debtor’s interest, reduce their debt and release them from any further commitments at the end of the agreed period.
While debt agreements are a real saviour to many, the solution isn’t for everyone, not all people meet the qualifying criteria.Generally, debt agreements take the following steps.
When a debtor learns that they are financially squeezed such that they’re losing control of their finances, they should assess their income versus their expenses. This way, they’ll know how much they can afford to repay on loans, and still have enough money for essentials.
In addition, the debtor should call the specialist hardship team at their bank or any other financial institution they’ve borrowed from. When speaking to the financial hardship team either verbally or in writing, the debtor should be frank and honest with them about his or her personal circumstances so the team can determine if, and how, they can help. He or she should also let the financial institution know why his or her financial situation has changed and express interest for the institution to consider providing him with hardship assistance.
The lending financial institution on its side may ask for some information to help assess the debtor’s financial situation. For example, they may ask for a statement of financial position that outlines the debtor’s income, assets, liabilities and expenditure, debtor’s account statements, employment contracts or payslips or both, medical certificate from a qualified medical practitioner, separation statement, etc. It is this information, an explanation of the debtor’s circumstances and the steps they’re taking to return to a position where they can afford for repayments that help the lending financial institution make the appropriate decision.
Any lending financial institution will always look for a suitable solution for their debtor under financial hardship. If you are finding yourself struggling to make your repayments and are scraping to pay for the bare necessities, then contact your bank or financial institution. Speaking with the financial hardship team is the best place to start. If you find that you are still struggling after speaking with your bank, give Debt Cutter a call and see what debt management strategies might be best suited to you.