Informal Agreements have been around for a while. 2020 and Covid saw an explosion in the number of Informals and broad acceptance, even a preference for Informals from creditors. An informal agreement involves an Organiser negotiating with multiple creditors a new affordable "agreement." You make a regular payment to the Organiser, who then distributes that money to creditors.
Consumers should be cautious of Organisers who do not administer the agreement. Those who negotiate an informal agreement for a fee and then disappear, leaving the consumer to pay and deal with creditors on their own. An Organiser who makes payments to creditors and deals with creditors will ensure that the agreement is sustainable and affordable. If an issue arises down the road, they will help you deal with that situation.
Historically, creditors have shown a reluctance to modify contracts long term and have had a preference for formal insolvency agreement over Informals however;, Covid has changed all of that. Long-term modifications, which typically include freezing of interest and reducing the amount to be repaid, can now be obtained for those facing long-term difficulty.
Consumers have also shown a preference for Informals. The uncertainty of Covid has meant consumers have not been confident enough to enter into "permanent" debt agreements, despite their often lower total repayments. Informals also do not impact credit histories; in fact, our internal research shows credit scores generally improve while in an Informal. Informals are also not "formal insolvency" which can be scary, despite those fears being misplaced.