What does a Partial Settlement actually mean?

Th3_W12ar6 · 21 August 2014 at 5:53PM

I may be in a position to offer my creditors a lump sum settlement next month. I have informally contacted them and them seem happy to accept the amount I am offering but have said that although they will require no more monthly payments my account will only be marked as Partially Settled.

So, from a practical point of view, what does a Partial Settlement actually mean? It sounds like the DCAs will not be requiring any further payments from me however I have heard rumours of people having their original lending bank take money from future lump sums these people receive several years after a Partial Settlement was made and accepted due to the original lending banks "offset rule".

I now face a paradox. The stress of having to live on such a limited budget over the last 7 years as part of my DMP has meant that I have been unable to work. If the Partial Settlement is successful next month a considerable weight will be taken off my shoulders and it is quite possible that in a year or so I may be able to start work again and start receiving monthly paychecks from my employer. Does a Partial Settlement mean that I will be forever under the threat of having money taken out of future wage deposits by my bank to pay for the portion of the debt which I thought they had written off?

Tixy · 21 August 2014 at 6:03PM

You need the creditor/debt collector to agree to accept the sum in full & final settlement of the debt (you need this in writing from them before you pay). This will prevent them selling on the rest of the balance or chasing for it themselves, or offsetting any money held at the same bank.

Usually a creditor will only agree to mark your credit file with a partially satisfied marker. This indicates to any other potential lenders that you did not repay the full balance, but that you did make a satisfactory offer and do not owe anything further towards that debt.

Th3_W12ar6 · 21 August 2014 at 7:12PM

Tixy wrote: »

You need the creditor/debt collector to agree to accept the sum in full & final settlement of the debt (you need this in writing from them before you pay). This will prevent them selling on the rest of the balance or chasing for it themselves, or offsetting any money held at the same bank.

I think they did mention something about "Full & Final" and that the remaining debt would not be sold on... but I am getting very confused by the meaning of the "Partial Satisfied" marker. To my simple mind if they agree to my offer then the debt is satisfied full stop but it is very difficult to understand what your creditors are saying when you are passed to a DCA call centre in a distant country where English is not their native toungue and you have difficulty understanding what on earth they are saying. That is why I am asking for clarification in this forum.

So, thinking out loud, am I right in thinking that, even although the DCA accept a payment of 50% of the outstanding debt, so long as they say the magic words "Full & Final" then it means that the original bank cannot touch any money I pay into my current account with them in future?

sourcrates · 21 August 2014 at 7:27PM

Hi,
Your debt will only be marked as "settled" if you repay the full amount of the debt as per your original contract.
Anything else is a "partial settlement" as you are not paying the full amount back as your original contract specified.
That is standard industry practice.
Make sure you get it in writing that the remainder of the debt will not be sold on.
If you have any worries about offset, simply get a new bank account with another bank.

Th3_W12ar6 · 21 August 2014 at 8:55PM

sourcrates wrote: »

If you have any worries about offset, simply get a new bank account with another bank.

That thought has crossed my mind but considering my credit history is trashed I am not sure if any other banks would allow me to open an account. I will have to have a rummage around this website to see if anyone has tried this.

sourcrates · 22 August 2014 at 11:58AM

Th3_W12ar6 wrote: »

That thought has crossed my mind but considering my credit history is trashed I am not sure if any other banks would allow me to open an account. I will have to have a rummage around this website to see if anyone has tried this.

You can get a basic bank account, with no borrowing facilities, these are available to almost everyone.
Coop do a good account called "cashminder" that comes with a Visa Debt card.

Th3_W12ar6 · 22 August 2014 at 12:56PM

sourcrates wrote: »

Coop do a good account called "cashminder" that comes with a Visa Debt card.

Thanks for the tip Sourcrates; I look into that.

What does a Partial Settlement actually mean?

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