Full and final settlements

marklar_2

Hi folks, just looking for some clarification on making full and final settlements.

I owe around 14,000 and currently use payplan to pay around 110 per month. I have received letters offering to clear the debt as full and final payments for around 3500 and I am luckily in a position to do this, however, am I correct that this will then be marked on my credit file and last 6 years?

I am put off by the idea that my credit status will be ruined for a further 6 years, even though the debts will be clear. I am just unsure how to proceed from here.

Many thanks in advance for your help.

GeorgeUK

As i understand it, the accounts will show for 6 years after they are closed.

I'm not sure if a default closes the account though or just indicates that the agreement was defaulted. Does it say on your credit file if the account is closed?

Edit: Found this on the experian site.
https://www.creditreporthelp.experian.co.uk/static/ycrhc/1b6c25a95fb5428588da337cdfcd613a.html#qc4dbb673031b476691c9c3bb9128dff5

Looks like if the account has a default, it will be removed from your file 6 years after this so hopefully you have a default

happychappy74

What is the repayment agreement? Is it an IVA, DMP etc?

Charco_2

Has to be a DMP of some sort: £110 would be a rather small IVA payment (but possible) and if he was in an IVA then WHO would be writting to him to offer F&F payments of £3,500 - All i mean is that it sounds like an INFORMAL arrangement that a creditor is trying to bypass!

I would imagine that the F&F Payment would then be marked on your credit file for the next 6 years, not from some date in the past. However, if you are currently paying it off in an informal arrangement then your credit file will reflect this from 6 years after you finally finish paying the debt anyway.

It sounds like a good offer but my only concern would be will this deal with ALL your debts?

DarkConvict

I believe an account would be marked as Closed and Partially Satisfied, in addition the default should be updated if one exists.

F&F offers must be in writing, otherwise you may without realising be only doing a partial settlement, on which they pass the remainder to a debt collector. So you do have to be careful and ensure that they close the account, update your credit report, and do not intend to pursue themselves or via a 3rd party the remaining balance.

marklar_2

Thanks so much for the replies.

Its a DMP I currently have through Payplan. I was going to make the full and final payment offers through payplan so that they can ensure the correct wording as to make sure I am not pursued any further for the debts. Is this best practice?

Just to clarify then, If I make the settlement now, as a full and final payment, it will ruin my credit file for a further 6 years. If I pay off the debt more slowly, month by month, then it will still stay on my credit file (and ruin my rating) for 6 years from when the debts are settled?

GeorgeUK

Do you have defaults on all the accounts?
If so, the account will disappear off your file 6 years after the default date.

Doublecheck this with experian or national debtline who should be able to say for certain.

If there is no default, are the accounts closed?
If so, they will fall off the credit file 6 years after the account is closed.

I wouldn't do the F&F though Payplan - there are template letters on the board or on the national debtline site you can use.

DarkConvict

The choice does come down to you, but so long as you get the offer in writing and that it suitability updates your credit file and they won't chase you for further payment. It would probably be a good offer. Because it does leave you now another £10k to pay off your other debts (over time).

If your in a DMP, you credit file is probably going to have been shot up already, this way it will at least bring you closer to been debt free sooner, rather than later.

marklar_2

I have defaults on both accounts, dated 3 years ago.

So my credit file will be blemish free when these expire in 3 years, if I make a full and final settlement now?

Deep_In_Debt

marklar wrote: »

Thanks so much for the replies.

Its a DMP I currently have through Payplan. I was going to make the full and final payment offers through payplan so that they can ensure the correct wording as to make sure I am not pursued any further for the debts. Is this best practice?

Just to clarify then, If I make the settlement now, as a full and final payment, it will ruin my credit file for a further 6 years. If I pay off the debt more slowly, month by month, then it will still stay on my credit file (and ruin my rating) for 6 years from when the debts are settled?

Just to echo, i wouldn't use Payplan for F&F as they may not negotiate the best deal for you - check out the National Debtline website for a good template letter.

If you are in a dmp, your credit file will be shot for 6 years after your last payment. If you make a F&F, your credit file will be marked as "settled in full" which is better than "partial" and better than waiting for 6 years for the debt to fall off.

In your situation, I'd go down the F&F route if you can but that's just my opinion.

GeorgeUK

So my credit file will be blemish free when these expire in 3 years, if I make a full and final settlement now?

I would doublecheck this with the credit reference agency, but that is my understanding.

The only thing you will need to be careful of is the working of any settlement agreement. You need a letter from them that states they accept the payment as a full and final settlement. Not a short settlement and not a partial settlement - this would just allow them to come back later demanding the rest. You also need the letter they send you to state neither they nor any associate company will take any other action to enforce or pursue this debt in any way whatsoever and that you will be released for any liability.