SETTLEMENT OFFER EXPLAINED or “THE GRANDMA OFFER”
Common and Legal ways to avoid Bankruptcy.
If you are being pursued by a creditor itis important to point out there are several options available that individuals in debt can also consider. Depending on your circumstances one of these options may be preferable to bankruptcy and in many cases offering a Part 9 Debt Agreement (see below) is a viable alternative for anyone who wants to pay back something as opposed to going straight into bankruptcy.
Why is it called the GRANDMA OFFER? Sometimes it’s a person’s grandma who doesn’t want them to become bankrupt, so the grandma helps out. Not all grannies are rich however!
The GRANDMA OFFER. This is where a lump sum offer is made to pay out all your debts at a reduced amount.
EXAMPLE: You owe $40,000.00 on 4 different credit cards. For an easy example we will say you owe each one exactly $10,000.00.
Each creditor is offered say $6,000.00 to cancel your debt.
They all agree, this means that for $24,000.00 you have paid off $40,000.00 of debt. It’s a good solution if you can get the $24,000.00 from someone.
NEGOTIATED ARRANGEMENT. This is where arrangements (basically promises from you to the creditor) are agreed upon so that the creditor leaves you alone and doesn’t commence legal action.
This is a good way of dealing with the problem, however it relies on you holding up your end of the agreement, as long as you can keep your promises and the creditor/s don’t change their mind. They can at any time ask you to start paying more. With NEGOTIATED ARRANGEMENTS you have very little Legal Protection. This can cause you problems.