Full and Final Payments Help!!!

JK11

scarednshakin wrote: »

Thanks Susieanne, just want to sort it out. Have been living with this for a long, long time then had LBM. There is no real way things will improve and thought when we were offered this money it would be the best way to go. Default letters are flying through the door, only thing Payplan can advise is a Trust Deed and when I added it all up the creditors would get more this way than through the TD.

Hi scarednshakin

Sounds to me like there may be a few options which could be suitable for you. None of them will be perfect cures, each have their ups and their downs. What you need to do is look at each option in turn and consider the good points and the bad points of each. A few years ago I didn't know much about dealing with debts until my o/h found herself in a difficult position which we managed to work through. During that time I learned a lot about trust deeds in particular but in the last six months I have learned a lot about the other options which exist as well. I'll summarise each for you below:

Debt Arrangement Scheme

PROS:

- it's not insolvency,
- interest frozen (assuming you keep to the terms that is, and plan does not get revoked at any time)
- protection from further action by creditors and freezing of ongoing charges

CONS:

- You must pay the debt in full (I know that's not necessarily a bad thing, but from a timescale point of view it is definitely a very important factor in your decision making process). How much is the total unsecured debt and how much can you afford to pay each month? Divide total debt by monthly payment and you'll get the duration that the DAS will take. If it's over ten years, there's a good chance that it will not get approved.

- interest is frozen but it's only written off if you get to the very end of the plan and pay the debt off in full (if you default on your plan and it gets revoked, all the interest that had been frozen gets backdated and added back onto the original debt. This means that if you default in year eight of a ten year Payment Plan and it ends up that the plan is revoked, there is eight years of interest going to get backdated and added onto the outstanding debt. Ouch.

- although it's not insolvency, don't expect it to have no impact on your credit rating. You will in effect be paying back less than your contractual payments each month until the debt is cleared in full, so expect your credit file to reflect this for the duration of the payments plus six years thereafter.

Debt Management Plan

PROS

- More flexibility that a DAS from the point of view of your monthly payments. It's an informal agreement between you and your creditors and generally can cope with variations in monthly contribution if your circumstances dictate. With DAS, there is a formal process you need to go through if the monthly payment is to be varied and the creditors have the option to refuse to agree to it.

CONS

- still need to pay the debt off in full
- cannot guarantee that interest and charges stopped (although if you are using one of the non fee charging agencies such as Payplan or CCCS, then I would imagine you have a better chance of getting the interest frozen)
- reliant on the goodwill of the creditors (if they not happy with the plan, they could still take action against you)


Full and Final Offer

PROS

- If you can get all the creditors to agree to it, then you can get some form of debt write off without having to go through an insolvency process.

- If everyone agrees, then it is a quick fix and the problem is solved once they all confirm your payment has been received as a full and final settlement

CONS

- You have the find the funds from somewhere to make the full and final offer. In your case you are lucky that a relative has offered to stump up the funds. Without being nosy, can I ask if they are offering it as a gift, or will you need to pay it back in due course? If the latter, then I guess you are simply transferring the problem from the bank to the relative! If the former, then you are a lucky person with generous relatives :-)

- It is only really effective if all your creditors agree to it. If taking this approach, make sure that you get agreement in writing from them all that they will accept the offer in full and final settlement. No point raising a load of funds if it means that you still have debt left at the end of it. In your case Mint have been pretty unhelpful so far, especially when you pointed out that they would get a better return from this than they would in a trust deed.

Protected Trust Deed

PROS

- creditors deal with your trustee rather than you, so the calls and letters should stop pretty soon after trust deed signed, this can provide a huge relief and peace of mind if you are being plagued by them at the moment
- once the trust deed becomes a protected trust deed you are protected from any further action by the creditors
- there is a pre determined time period over which you pay. Assuming you have dealt with all your responsibilities in that timespan then you are discharged of any liability to pay anything else of the debt included in the trust deed. i.e. pay what you can for a fixed time scale and no more, in contrast to DMP or DAS where you keep paying until all the debt is paid in full
- if circumstances change, the level of payment will be adjusted accordingly i.e. there is a degree of flexibility there which is not present in DAS. If you need to change the level of your contribution due to circumstances outwith your control, your trustee can agree to do this without having to ask permission of your creditors.

CONS
- it is a form of insolvency and will be on your credit file for six years
- if over a third in value, or a majority in number object to the trust deed, it will fail to become protected. Options are then to run with it unprotected, or convert into bankruptcy instead. Creditors are usually looking for a minimum return in a trust deed for them to accept it. The IP firm you are talking to should be able to advise you the relevant figures, as it is very much dependent upon the total level of debt in the trust deed. Some firms are offering trust deed over periods longer than three years (up to maximum of five I think) where the money coming in is not going to be sufficient for the creditors to accept in three years. Even a five year trust deed may be very preferable to a DAS or DMP depending upon the total debt level.
- because it is a form of insolvency it also has to take into account any assets you have. Do you own any property? If so, does it have any equity? If so, that will need to be raised at some point - your IP can give you more info about the options for doing that.

Bankruptcy (Sequestration)

Depends upon what stage the creditors are at. Generally they have to go to court and get a decree, then serve a charge for payment before this even becomes an option. From what you have posted, it doesn't sound like they are at this stage yet. The exception is a new route which became available last year called the Low Income Low Asset route into bankruptcy. This is only applicable to people whose income is less than the equivalent of minimum wage times 40 hrs per week (i.e. £229.20 per week before tax) and with assets of less than £10k, no individual asset over £1k (this means that you can't own property or have a car valued over 1k, which does exclude a lot of people for whom i think it was intended to help, which is a shame)


All in all, I can't tell you the best option based on the information you have provided yet, because I don't have enough info to base that assessment on.

A fair summary for you is probably as follows:

(a) If you could pay the debt off comfortably in less than ten years and are happy to enter into an agreement of that duration, then DAS or DMP are good options for you. If your income varies regularly, perhaps DMP better than DAS, if income steady, then perhaps DAS better than DMP.

(b) If it will take you more than 10 years to pay back your debts, but you have a lot of equity in your assets which you would find it very difficult to raise (and don't want to sell them), then DMP is probably the better option.

For either of the above options, I am sure Payplan will be able to help you - regardless of who you speak to, make sure it is a non fee charger (i.e. usually best to restrict to Payplan or CCCS)

(c) If level of debt such that it will take an extremely long time to pay back in DMP or DAS and your level of assets is not huge, then Trust Deed becomes a much better option. If asset level reasonably high then trust deed can still be viable short term option (compared to DAS and DMP) but make sure you discuss assets fully with the IP before you agree to anything.

If going down the road of a trust deed, I recommend that you make sure it is one of the bigger companies you deal with as from what I understand, they tend to be under more scrutiny to make sure they are doing their job properly.

(d) Full and final would be ideal as long as (1) all creditors accept it and (2) you are not borrowing money to do it, as this simply transfers the problem from one creditor to another.

Hope the above is helpful :-)

scarednshakin

Hi JK11 sorry did not reply to post, computer has been having various hissy fits!!!!

Thanks for all the info you gave, it is really helpful. We have had some response to the F&F letters that were sent out, some slightly hopeful, others saying no. Have answered them all and waiting for the next replies. Had card through door from Debt Collector, that was scary.

The money being offered by relative is a gift and believe me we know how lucky we are that is why we want to try and sort it out once and for all.

We have looked into all the alternatives and due to the level of debt the Trust Deed is the only real option if the F&F offers are refused. We have been told that it would be for 5 years and the guy we spoke to was really helpful. He also said to try the F&F letters before coming back to him. We rent our house so there is nothing of any value.

Will just wait and see what letters come back this time!!!!

JK11

scarednshakin wrote: »

Hi JK11 sorry did not reply to post, computer has been having various hissy fits!!!!

Thanks for all the info you gave, it is really helpful. We have had some response to the F&F letters that were sent out, some slightly hopeful, others saying no. Have answered them all and waiting for the next replies. Had card through door from Debt Collector, that was scary.

The money being offered by relative is a gift and believe me we know how lucky we are that is why we want to try and sort it out once and for all.

We have looked into all the alternatives and due to the level of debt the Trust Deed is the only real option if the F&F offers are refused. We have been told that it would be for 5 years and the guy we spoke to was really helpful. He also said to try the F&F letters before coming back to him. We rent our house so there is nothing of any value.

Will just wait and see what letters come back this time!!!!

Hi scared, glad the post was helpful. Hopefuly they will all come back and say yes. If not, at least you have some more options with the family gift up your sleeve.

I'm interested that the trust deed was going to be five years - i presume that's because you can't afford enough each month to do it in three years. If the creditors don't go for the full and final offer you could still do a trust deed over three years if you are able to offer a lump sum as well. only reason IPs tend to make trust deeds last over three years is if you can't afford enough to make the creditors accept it. If you are able to add in a lump sum from family then i'm sure that you could look at a trust deed over three years - definitely worth speaking to your IP about it.

Look forward to hearing how you get on!

scarednshakin

Hi JK11 thanks again, got some mail today so Abbey might consider F&F have to send back some info. Barclaycard said no, but sent another letter back to them so will see what comes back. There is one thin I think I will put Royal Mails profits up with all these letters I am sending!! Let you know what happens.

JK11

sounds good, definitely worth persevering with the letters.

don't know how much money your family are offering or how much you total debt it, but i'm assuming both are fairly hefty amounts from the context of your posts to date. if the full and final approach didn't work, and you went for the three year trust deed with a lump sum option, then I dare say that the amount of the lump sum wouldn't need to be as much as your family are currently offering, so it could be a cheaper option all round. just a thought.

scarednshakin

thanks for that, will let you know what the next installment is!!! Good to know that if we go to a TD might not need so much from relatives and it would cut time down to 3 years. Will keep going wiyh letters just now and see what comes back. Thanks again.

scarednshakin

Okay update time. Still plugging away with the letters, had some hopeful news from Abbey waiting to hear from them. Mint have agreed to reduce payments for 6 months so will do that then try F&F again after 6 months.

Had letter today from BoS, they have been calling none stop and cards through doors about visits. So the last letter I wrote I explained the situation again and that also I only wanted to contact them and be contacted in writing. In the letter they said "I must advise that we are not at liberty to restrict our contact to writing only, and will continue to make contact within Ofcom and Office of Fair Trading rulings."

They have been the ones that have been calling the most and thought that by sending out the letter it might help, any advice would be great.

scarednshakin

Have had some success with the F&F offers Barclaycard have settled at just over 30% and Northern Rock, our biggest debt, was settled today :j:j:j for 33%. MBNA have agreed to settle but received a letter from them on Friday, letter worries me. It only mentions a Partial Settlement and they do not say that the debt will not be passed on. The other letters we have received have both said that the payment is F&F and that no other agency will chase for the money.

OH phoned MBNA today and they said that they would not pass the debt on, but I am still worried. What is the best way to go forward with this one

Don't think it has sunk in yet that Northern Rock accepted a F&F every time we contacted them they told us to come back with a realistic offer, but OH contacted them again last week and they agreed.

beckyboo2

Hi Shakinscared, have been reading your updates with a lot of interest as I'm fairly new to this but also have a debt I cannot afford and want to make a full and final offer on. Can I just ask, is there a "standard format" for the letters you have written making the offers, and what sort of percentage of the final amount did you start by offering?

Thanks

Beckyboo2

GeorgeUK

Hi scarednshakin

If they haven't put it in writing, there is no way for you to prove what was agreed. I wouldn't trust them unless you have it in writing that it is a full and final settlement and that you are absolved from any further liability.

Well done on getting those other ones settled though. Make sure you keep a hold of those confirmation letters for at least 6 years.