Debt Repayment Agreement

A debt repayment agreement is considered a legally binding contract under federal and state laws, according to the Federal Trade Commission (FTC). Failing to uphold a debt repayment agreement can lead to a wide variety of financial consequences.

Credit Reporting Considerations

If you honor a debt repayment agreement, the lender will often report that positive payment history to the major credit bureaus, according to the FTC. But if you miss payments, make payments late or simply fail to pay on the account, the lender will report that as negative credit information for up to 7 years.

Lawsuit Potential

Failing to pay a debt can result in the lender filing a civil lawsuit against you, according to the book "How to File for Chapter 7 Bankruptcy." Also, the lender can receive a judicial order that allows him to garnish part of your wages until the debt and associated legal fees are repaid.

Employment and Housing Considerations

Not honoring a debt repayment agreement, even if you don't ultimately file bankruptcy, will still negatively impact your credit, according to both the FTC and Experian. In some cases, you cannot get certain types of jobs or housing if you didn't pay your debts as promised.

References

• Federal Trade Commission: Building a Better Credit Report
• Experian: Frequently Asked Credit Dispute Questions
• "How to File for Chapter 7 Bankruptcy"; Stephen Elias, Albin Renauer and Robin Leonard; 2009