Full and final settlements - advice needed please

Clare_B_4

Hi all

I've had a DMP with CCCS for nearly 4 years now, and I have around £8500 owing to 4 creditors. Fortunately I've just received PPI redress from HSBC which doesn't cover all of it, but would take out a large chunk of it.

I spoke to CCCS the other day and explained that I'd received this money and asked how I should go about using it to pay my debts. They mentioned offering full and final settlements to my creditors which I'd heard of before but didn't really know much about.

Ideally, I'd like to keep some of the redress money aside as I have literally nothing in savings/in the bank at the end of the month, so I wondered what would be a reasonable offer to make my creditors? Is there a certain percentage of the debt I should offer as a starting point? CCCS said that they might come back and ask for more, so I don't want to go in too high!

Thanks!

cif85

Hello Clare_B

A good starting point would be (...and if someone more experienced would like to correct me then please step in!...) to divide up the amount available for F&F settlements based on the size of each debt.

E.g.

You have £500 available, and three debts totalling £1000, made up of Debt A for £500, Debt B for £300, and Debt C for £200.

Work out the portion of the overall debt that each individual debt makes up:
Debt A = £500/£1000 = 50%
Debt B = £300/£1000 = 30%
Debt C = £200/£1000 = 20%

Once you have these percentages, apply this to the lump sum that you have - so in this scenario, you would offer £250 of your lump sum to Debt A.

I think it's important to show your creditors that you are treating them all equally and fairly, and that you have divvied up the money between them appropriately. Make it clear that if they don't accept what you are offering, the money will go towards your other debts and you will carry on repaying them as before.

Now please feel free to shout me down if I'm not correct!

fatbelly

That's the way National Debtline say you should do it, and there's a template offer letter at the end of this factsheet

Factsheet | Full & Final Settlement offers

However, that doesn't allow yourself any room for negotiation, and most creditors will reject your first offer, as CCCS hinted. Personally I'd start at 25%. I wouldn't state the total available as the greedy creditors will want all of it. And I would say that the money is coming from third party and is time-limited. I also wouldn't bother too much about how the credit file is marked - most will mark it 'partially settled'.

dancingfairy

Hi - another way to do it. It might be worth targetting either the one that has been the biggest pain all along with you or the largest debt first- start at say 25% and try and settle and then work you way down the list to the smaller debts. Obviously if you can't settle at a decent level then withdraw your offer and try another one.
Best of Luck
df

DS4215

I've just started with an offer of 20% and they came back wanting 60% (ish) within 30 days. I am giving it a week then will send in a letter raising my offer and seeing if I can get theirs down a bit.... or at least get an extension until I can raise the extra cash!

fatbelly

DS4215 wrote: »

I've just started with an offer of 20% and they came back wanting 60% (ish) within 30 days. I am giving it a week then will send in a letter raising my offer and seeing if I can get theirs down a bit.... or at least get an extension until I can raise the extra cash!

This is the only occasion where it might be worthwhile phoning, unless you need to slow the process down. If you do get them to agree (maybe halfway at 40%?) then make sure they know that you will not be releasing any payment until this is confirmed in writing, with appropriate wording.

Best of luck.

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Clare_B_4

Thanks all. I didn't want to start with the total amount I have as I really feel I need some money put aside for an emergency, as I've struggled the last 4 years.

CCCS does have a calculater on their website which will divide up the amount you can offer proportionately between your creditors, but I thought working out a certian percentage would be easier and I don't want to price myself out of what I can actually afford to offer. I also want to be able to change my mind if I want to and just carry on paying them as I have been for the last 4 years.

I was slightly concerned about credit scores; obviously after being 28k in debt 4 years ago I shall never be touching a loan or credit card ever again, but I wondered about the effect a partial settlement would have on a credit check done by an estate agents if/when I want to move (renting). Would partial settlements go against me? I moved 3.5 years ago with no problem after having struggled to keep up with repayments.