Full and Final Settlement Frequently Asked Questions
Q. What is a full and final settlement?
A. A full and final settlement is an offer of partial repayment to one or more creditors in the form of a one-off lump sum payment to each creditor. If the offer is accepted, the creditor will write off the remainder of the unsecured debt.
You might find yourself in the position of making a full and final settlement offer if you unexpectedly receive a lump sum of money. This could be from:
- The sale of property or other assets
- Proceeds from savings, investments or pension policies
- Re-mortgaging your home
- An equity release scheme
- Borrowing or being given money by family or friends
- A redundancy payment
- An inheritance
- A lottery win
- Any other type of financial windfall.
Q. Who can make a full and final settlement offer?
A. At Debts.org.uk, our full and final settlement service is available to both current debt management clients and new applicants. If you’re new to us, you might be in a debt management plan with another company, liaising with your creditors directly or receiving free debt help from a charity.
Q. How do I make a full and final settlement offer to my creditors?
A. Debts.org.uk will act on your behalf to make a full and final settlement offer to your unsecured creditors. We’ll deal with all the paperwork and negotiations, keeping you fully updated throughout the process. To get started, simply ask your Account Manager about full and final settlements and he or she will be happy to help.
Q. Do my creditors have to accept my full and final settlement offer?
A. Different creditors have different policies for accepting full and final settlement offers and there are no guarantees that your offer will be accepted. Your creditors may refuse to agree a settlement if you’re offering to pay less than the full outstanding balance.
Debts.org.uk has the expertise and experience to create and present a realistic case to your creditors. We enjoy excellent relationships with many major creditors and our staff are trained negotiators, waiting to help you in coming to a favourable settlement.
Q. Why would a creditor accept a full and final settlement offer?
A. There are several reasons why creditors might accept a full and final settlement offer. These include:
- Preferring to receive a single, one-off lump sum payment now, rather than smaller payments over a longer period of time.
- A recent or forthcoming major change in your circumstances, which means you’ll have little or no ability to make repayments going forward.
- Avoiding legal expenses and other costly collection alternatives and expenses. For example, if your creditor took you to court to try and recover a debt, the associated court fees and other costs might leave little or no funds to be awarded to them afterwards.
Q. Why wouldn’t a creditor accept a full and final settlement offer?
A. As noted above, Debts.org.uk can’t guarantee a 100% success rate in our negotiations for full and final settlement offers. This is the case with all debt management firms as some creditors can’t always accept an early settlement. This can happen for many reasons and, at times, the offers we negotiate may need to be reviewed and re-presented as a result.
Q. What happens if a creditor doesn’t accept my full and final settlement offer?
A. Debts.org.uk has many years of experience in negotiating successful settlement offers with creditors on behalf of our clients. However, as noted above, we can’t guarantee that your offer will be accepted. If this is the case, we’ll help you find an alternative and appropriate course of action, depending on your individual circumstances.
Q. What are the advantages of making a full and final settlement offer?
A. If your offer is accepted, the advantages include:
- Clearing some or all of your unsecured debts with a single, one-off repayment. This means you’ll pay less than the total amount owed to one or more of your unsecured creditors.
- Your debts will be paid off sooner than originally planned, so you can make a fresh start straight away and take the opportunity to manage your finances more effectively in the future.
- Your creditors should then mark your debts as ‘satisfied’ on your credit file, so any future searches will show that you’ve successfully dealt with these debts. See below for more information on how full and final settlements can affect your credit file.
Q. What are the disadvantages of making a full and final settlement offer?
A. The disadvantages include:
- You need access to a lump sum, which could be used for other purposes.
- Once your creditors know you have access to a lump sum, they may demand full payment of your debts.
- It’s not guaranteed that your creditors will accept your offer, so some or all of your accounts may not be settled.
- Clearing your debts won’t remove any default notices or CCJs previously registered against you from your credit file. These will remain on record for 6 years from the date they were registered.
Q. How will making full and final settlement offers affect my credit file?
A. If your creditors agree to your full and final settlement offer, they’ll update your credit file in one of two ways:
- Marking your debt as ‘satisfied’ or ‘settled in full’. This won’t affect your credit rating, unless any default notices or CCJs have been previously registered against you in relation to that debt (see above).
- Marking your debt as ‘partial settlement’. This shows other lenders that the debt was cleared, but less than the full outstanding balance was paid off. This information will appear on your credit file for 6 years from the date of settlement, and it might make it harder for you to obtain credit during this time.
Q. Can I use full and final settlements to pay off secured debts?
A. No. Full and final settlements can only be used for unsecured debts, such as credit cards, hire purchase and payday loans. They also can’t be used to pay off rent arrears, council tax or utility bills.
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