On a DMP, could I negotiate the balance if I was able to pay in one lump sum?

incred

I'm currently on a DMP and at the rate I'm currently paying, it will take me the next 10 years. My fixed mortgage deal has ended and I can't get a remortgage with the DMP in place. It's like a noose around my neck, I just can't do anything and I really don't think I want to spend the next 10 years with that burden.

So, seeing as property prices are on the increase, I was thinking of selling my property to clear my debts and start over.

What I was wondering is:

1. Can anyone advise me on whether I could negotiate a reduction in the overall balance of the debts if I offered to sell my property and pay it all off in one lump sum?
2. If I negotiate a reduced balance for paying in a lump sum, would they accept me keeping some of the difference myself to assist me in starting again (deposit on a renal property etc)?
3. How would I go about negotiating such a thing?

Anyone with any experience in this area able to give me advice, I'd be very grateful.

Tixy

Hi

Its always possible to try negotiating reduced full & final settlements on debts that are in a DMP/have been defaulted.

You need to negotiate with each creditor individually, not a lump sum to the DMP provider.

If your DMP is with one of the free/charity providers you could ask them to negotiate settlements on your behalf, although many people prefer to do it themselves.

If you are with a commercial DMP company do not get them to negotiate for you, as they will charge you extra to do so.

As you will be making the settlement offer you can decide how much you are prepared to offer and therefore ensure you keep some of your funds to yourself if you wish.

How to do it - once you have the lump sum write to each creditor with a settlement offer you can afford (best to start low as you can then increase your offer a little if they say no). Useful factsheet and template letter on national debtline website.

incred

Thanks Tixy for responding so quickly, I really appreciate it.

The debt management plan I organised myself directly with my creditors.

Would it be worth me making the offer prior to selling? So, for example, writing to them and saying, I've had the property valued and would be able to offer X amount as a settlement if it sold, would you be willing to accept this amount if I sell my property?

Any suggestions % wise where I ought to start in terms of offers?

Tixy

I think it will be difficult to get them to say for certain what offer they may accept at some point in the future. I'd wait until you have them money ready to make the offers.

Ideally what amount of money were you hoping to use to settle the debts and what is the total amount of your debts? What would be tje max % you could offer if all accepted the same level?

How much they will agree to settle for depends on many things including who owns the debt (original creditor, in house debt collector, third party debt collector), whether interest is still being charged, how long the DMP is predicted to last at current repayment levels, whether they have the correct documentation for the debt, where they are in the month/quarter cycle in terms of hitting targets for debt recovery, whether they woke up in a good mood or not etc.

Some people get debts settled at around 25% (so 75% discount), some may pay around 50% and others struggle to get offers around the 75=80% mark accepted.

The fact that your DMP is predicted to last 10 years will likely help..

incred

Ok great thank you. I just spoke to the National Debtline and they advised it might be worth writing and asking, how much the creditors would be willing to accept if I was to raise a lump sum. Are there any template letters for this (or similar that I could amend for my purposes)?

Sorry for all the questions - and thanks very much for your help.

Tixy

National debtline website has a template for making offers - perhaps you could amend that to ask how much they may accept?

fatbelly

You're going to get the best deal by putting a figure to them, as long as the money is available immediately.

If the lump sum is coming from sale of property, that also gives them one less way to enforce the debt - they can't secure it against property if you don't own any!

With a 10-year dmp and no property, you should be able to settle below 50%. But start lower.

There's no problem with asking them for their percentages now, but expect a lot of negative responses.