If you are struggling to pay off a debt or taxes to the Internal Revenue Service (IRS), you may be able to negotiate an instalment agreement. An instalment agreement is a payment plan in which you pay off your debt in smaller, fixed payments over a period of time.
In this article, we will dive into what an instalment agreement is, when it is appropriate to use one, and how to set one up.
What is an Instalment Agreement?
An instalment agreement is a payment plan that you negotiate with a creditor or the IRS to pay off a debt over time. Instead of paying off the full balance of the debt all at once, you make fixed monthly payments until the debt is paid off in full.
There are two types of instalment agreements: formal and informal. A formal instalment agreement is a legally binding document that outlines the terms of the agreement. An informal instalment agreement is an arrangement made between you and the creditor or the IRS, usually over the phone or in writing.
When is an Instalment Agreement Appropriate?
An instalment agreement is appropriate when you are unable to pay off your debt in full and need a more manageable payment plan. It is also a good option if you want to avoid negative consequences, such as late fees, interest, and penalties.
You should also consider an instalment agreement if you want to avoid more severe consequences, such as wage garnishment, bank levies, or property seizures. Negotiating an instalment agreement shows that you are taking responsibility for your debt and are willing to work to pay it off.
How to Set Up an Instalment Agreement
To set up an instalment agreement, you will need to follow these steps:
1. Determine how much you can afford to pay. You should calculate your monthly income and expenses to determine how much you can afford to pay each month.
2. Contact the creditor or the IRS. Contact the creditor or the IRS and explain your situation. They will ask you a series of questions to determine your eligibility for an instalment agreement.
3. Negotiate the terms of the agreement. You will negotiate the terms of the agreement, including the monthly payment amount, the length of the repayment period, and any associated fees.
4. Sign the agreement. Once you have negotiated the terms of the agreement, you will sign the formal agreement document or agree to the informal arrangement.
5. Make your payments on time. To maintain your instalment agreement, you must make your payments on time each month. Failure to do so could result in the termination of the agreement and more serious consequences.
Conclusion
An instalment agreement is a useful tool for paying off debts over time. It can help you avoid negative consequences and show your creditors that you are taking responsibility for your debt. By following the steps outlined in this article, you can negotiate an instalment agreement that works for you and your situation.
