agreeing a % pay off to settle outstanding debt

edinburghboy

hi everyone

i was wondering if anyone could offer some friendly advice.

basically i lost my job and didnt work for almost 18 months during which time cc's and loan repayments got on top of us

i am now back working but unable to live and pay off the outstanding - its almost 80k!!

my wife and i have decided to sell our home and move to a smaller place as we really want to get this sorted and get on with our lives.

the house move will free up some cash but probably around half the amount outstanding. a friend told me when he lost his job he negotiated a settlement amount which was a fraction of what was outstanding.

firstly, is this possible?
if so what is the going rate?
finally what impact does this have on my credit rating? does it show as a sum outstanding forever?

if anyone could help it may help my wife and I get some peace - its been a hellish 18 months

thank you

NorthernLas

Have you spoken to any of the debt charities about your situation? (have a look at the sticky called 'Who to contact for impartial advice')

It is possible to offer F&F, the going rate depends on your financial situation (if you have kept repayments it will be as much as 90%, if not it could be much less ... but your credit rating will already be damaged)
The debt will show on your credit record for 6 years - after this it is not shown (even though you may still be paying back the debt)

edinburghboy

thanks Northern Las

i did contact one of them when i wasnt working and they were helpful but what i am trying to avoid, if its possible, is to not be paying this off in 5/10/15 years time

my wife and i have had a really crap time with all this - sure most on here know the feeling - and we just feel if we could move and put it to bed in one go it'll feel like a fresh start

NorthernLas

National Debtline factsheet on F&F http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=24_full_and_final_settlement_offers

edinburghboy

very helpful

i cant find anywhere that tells me if you can write to the original creditor with an offer or do you need to wait till its with a credit agency??

e.g. my credit cards are still getting the min paid every month so mr virgin and my barclaycard and probably quite happy with the current arrangement but can i also write to them with full circumstances or do i need to "default" to have this option?

NorthernLas

You need to have a read up on terms ... a credit reference agency is an organisation that records your financial history (like equifax, experian, credit expert).

A DCA, or debt collection agency is an organisation that encourages you to pay your debt when you have not met minimum payments.

You can offer F&F if you have been meeting the minimum payments, but the % they are prepared to accept may be very high.

edinburghboy

thanks for all your help NorthernLas

that makes sense

Miss_Poohs

Hi Edinburgh Boy - I'd go see someone at CAB or Welfare Rights for some advise, if you're living in Scotland you may well even consider a DAS.

GeorgeUK

Did any of the cards or loans have payment protection insurance on them?
If so, these should have paid out for 1 year after you were made unemployed - if you have PPI and didn't get the money, you should reclaim it.

How much to offer creditors can vary. Rule of thumb is 25%-50% if the debt is with a DCA and 50%-75% if it's still with the original creditor. If the debt has been sold on to a DCA instead of a DCA dealing with it on behalf of the creditor, they would have paid pennies in the pound for it. You need to make sure that any settlement absolves you from further liability though so do not accept a partial payment - that usually just means they will sell the remainder of the debt on to another DCA. You want written confirmation that it will be a full and final settlement.

edinburghboy

quick update

we were advised the house sale could take some time - they were right - so in the meantime i sorted out a DMP

this has been great as letters from creditors pretty much dried up and we are paying out what we can just about afford

we now have an offer in for the house which we have accepted but of course all being well it will still take a couple of months for us to see the cash

my question then is will it be better to stop making the DMP payments now and start negotiating with the creditors. two main reasons i thought for this

firstly if we stop making payments they are perhaps more likely to accept f&f offer at a lower rate

secondly i have read on here that it can take months to get them to agree to accept these and i would obviously like this ended asap

any thoughts on this as a plan

fatbelly

Presumably the dmp is paying creditors below the contractual amounts. Have you received any default notices yet?

Personally I would stop the payments. You will get a few threatening letters but a couple of months on a dmp followed by a couple of months nil payment should soften them up for a F&F.

Start the negotiations when you have the money