In an informal settlement, you will personally contact your creditors and offer a settlement or hire a credit or debt counselling company to settle the debts for you.

What is an Informal Settlement?

An informal settlement is a do-it-yourself method to settle a debt. In an informal settlement, you will personally contact your creditors and offer a settlement or hire a credit or debt counselling company to settle the debts for you.

Is an informal settlement right for me?

This is dependent on the number of creditors you have and the amount that you owe. Generally speaking, the fewer creditors you have, the more feasible your informal settlement will be. There are also additional challenges to informal settlements:

  • You will need to negotiate with each creditor with regards to interest rates, payment amounts, and repayment schedules
  • Agreements made under informal settlements are not legally binding. This means creditors have no legal obligation to the agreement and can modify and terminate it if it is not recorded on a legally binding document.

Should I take a settlement offer offered by my creditor?

It’s not uncommon that when you are behind in payments and your bill has been turned over to a collection agency, you will be offered a settlement. This offer can be considered an informal settlement.

First, it is important to understand the terms of the settlement – typically, settlements require a lump sum payment immediately. If you’re already having trouble making payments, the lump sum payment will be difficult to manage. If you do accept a settlement offer, it is essential to get the settlement in writing; you could be asked to pay the balance of the amount owing even after paying the settlement. If you don’t have a signed and written agreement stipulating the terms of the settlement, you won’t have proof that you have settled your debt.

With this in mind, the most important thing to consider when you’re contemplating a settlement is to look at the full picture of your financial affairs. Will, this one settlement make your debt manageable? For clarity, manageable means that you’ll be able to afford the monthly payments needed to pay off your debt. Sometimes, it can be overwhelming to look at the full picture but it’s important to determine whether the settlement will resolve your debt issues not with just one creditor, but all of your creditors.

There are other debt-relief options that can address this problem, such as consumer proposals. It’s also important to do the necessary budgeting to make sure a settlement will make your debt manageable. During your free consultation with us, we will ensure that making a settlement will resolve your financial difficulties and not just delay them.

Would you like to pursue this option?

No sell and no pitch, just real help. Let’s talk about this option and double-check that it is the right one for you.