Partial Settlement / Full Settlement?

Charlie_B_2002

Hello,

I hope that someone will be able to offer some advice.

Here is the scenario:

In June 2011, owing to sudden unexpected loss of job, my partner was unable to make a payment on a loan and subsequently defaulted. Further payments of full value were made and a few months later in order to ease the situation, my partner contacted a debt management company. Since this time my partner has been on a debt management plan and agreed payments have been made monthly to two creditors. The current outstanding balances are: Creditor 1: £10,000, Creditor 2: £1,000.

My partner is aware of the responsibility to repay her debt and has happily been doing so. Since the time of the default, where my partner was a student and only working part time whilst studying, she has embarked on a full time career.

My partner and I have researched the internet into partial settlements of the outstanding debts, however, information seems contradictory. It is possible that in the coming weeks, an unexpected sum of money will come into our possession. This money will be used on the outstanding debts.

Can someone advise, what would be the best course of action to pursue? Is it worth my partner via the debt management company making a partial offer for immediate settlement of the debt? If this were to be the case, can someone advise on where this would stand when, at some point in the future, we apply for a mortgage. We would like this payment to be recorded as a full and final settlement.

Thank you for your time and I look forward to your feedback.

Sazzie23

Hi charlieB

Sorry I can't answer your questions,there is some info in the DMP mutual support thread about lump sum repayments, or maybe if you post there someone will be able to answer.

If you are with stepchange there is some info on their website about what to do if you get some extra funds.

Just a point, if you are repaying with a paid DMP manager, general suggestion is to move to a fee-free DMP like Payplan, stepchange or another charity.

Sazzie23

https://forums.moneysavingexpert.com/discussion/4803690

I just found this thread which might help a bit.

Good luck with it

simeyb

Hi OP. Certainly settling your debts if you can is a great thing, regardless of what you want to do in the future, like a mortgage. However, you need to think about a few things that will ensure you're in the best position once the debts are cleared, to be able to get a mortgage with a half decent rate.
The first thing is to determine how these debts are reflected on the three main CRA's. If they are showing as Default, then it is unlikely that you would get a mortgage at all until they drop off (six years from the date of default). However, these will be looked on more favourably if they are settled. Now here's the problem - if you reach a deal with the creditors to pay them less than the full outstanding amount, these will show on your CRA file as "satisfied" as opposed to "settled".

If they are defaulted accounts, perhaps this will make little difference as the negative impact of the default will trump anything else.

If the accounts are still showing as current, albeit under an arrangement to pay for example, have a think about whether its best to settle the whole amount or go for a lower amount to "satisfy" the debt. If you are offered a decent discount, you should of course consider this carefully as its less you have to pay back and, depending on the mortgage lender, they may not be overly bothered about the way you have finalised the debts.

Hope thats useful - I'm sure others will have views too