What you should know about personal insolvency agreement
Are you completely sunk in debts and are struggling hard to find a way out? If you can find no way to repay your debt to the creditors on time, you can always approach them and propose to get into a personal insolvency agreement or a PIA. As a part of this agreement, you would not be required to pay the full amount on due dates. Instead, you would be paying back the creditor an agreed amount of money over a good period of time that can range between 3 to 5 years.
Misconceptions about PIA
As personal insolvency agreement is a part of the Bankruptcy Act, many people think that getting into such an agreement with your creditorswould mean that you are declaring yourself as Bankrupt. This is a wrong concept, as the PIA is just a part of the bankruptcy Act (Part X) and it nowhere mentions or confirms that the debtor is bankrupt. The only relation that it has with bankruptcy is that it is a nice and legal way to get away with bankruptcy, yet strike a deal with the creditors as if you have gone bankrupt.
The process of PIA
As a part of personal insolvency agreement, as a debtor, you can propose a number of options to the creditor depending on what you can afford to pay. You can either offer the creditor that you would return a lump sum amount of money after a period of time once you have recovered from your financial crunch. You can also offer the creditor to proceed with the sale of certain assets that will make up for the debt amount, or you can offer a combination of these couple of options as well.
Once you have proposed your terms, a meeting of all the creditors would happen, and the creditors would evaluate your proposal based on certain things, one of which is that whether you are eligible to apply for a PIA as per the law or not. Voting would be done among the creditors and if the majority of creditors agree to your proposed terms, the PIA comes into existence. Check out Debt Helpline
Benefits to the debtor and the creditor
The benefits that a debtor would get by using PIA are that they can get rid of the threat of declaring bankruptcy. Also, the debts that are owed would be handled in a more orderly manner under the supervision of the law. There would be no undue pressure from the creditors to recover the debts, which they always do. Last but not the least, impact on credit scores with a PIA is far less severe than it would have been if the debtor had declared bankruptcy.
The benefit that the creditor would get out of PIA is that they would be getting a larger amount of their money back, as compared to what they would have got if the debtor declared himself bankrupt. Although they would not get back their money at regular intervals, they would still stand a chance to get back their money after a period of time.
No matter how simple and lucrative it may look, but matters related to personal insolvency agreement could get complicated at times. Hence, it is best that you get help from professional debt consultants who would be able to guide you with the process of getting into a PIA with your creditors and improve your financials and slowly get out of the puddle of debt.