Full and Final settlement advice

abi1811

Hi,


Having got into financial difficulties around 2008, I have since been paying off my debts at a very slow rate with payplan on a debt management plan. At the current rate I can afford to commit to my debts will not be cleared until 2041!
However, I am currently going through the process of PPI reclaim and have just had a offer back from a previously paid off bank loan. As I have 2 other claims in process which I hope to be successful with and which are both on settled accounts, I am hoping to gather a lump sum in order to make full and final settlements with my creditors. I was just wondering what experience others have had getting full and final settlement offers accepted. My debts are with HSBC(loan/current account and credit card), MBNA (credit card-debt passed to Moorcroft), Alliance and Leicester(Current account, Santander- also passed to Moorcroft) and Tesco Bank(credit card) and also a very old credit card debt which is with Link Financial.

National_Debtline

Hello there,

Over the years I've helped hundreds of callers obtain full & final settlements with their creditors. You may find that you will get very decent reductions if the debts have been sold on to debt collection agencies.

Here are some key points regarding full & final settlements:

• It is very important to make sure the creditor accepts your full and final settlement offer in writing. Make sure you keep a copy in case there is a dispute. This could happen years later and you may need the letter as proof.
• Never send a lump-sum payment before the offer is accepted.
• A friend or relative may be able to give you the money to make the payment. This helps your agreement to be more legally binding if the creditor accepts the money from a third party.
• If you are settling a debt that is large or particularly important, you could have a formal agreement drawn up by a solicitor and signed by you and the creditor. This is not normally necessary.

We have a comprehensive guide to full & final settlements which you can find if you click here.

Best wishes,

David @natdebtline

abi1811

Thanks David. You say that if the creditor accepts the money from a third party it makes it more legally binding, why is that?

National_Debtline

That's a great question. And to answer it we need to go back over 400 years to an important case called Pinnel's Case. In an nutshell, it was decided in that case that a part-payment couldn't be contractually binding as the full amount wasn't given. The part-payment was not 'good consideration'. So if you make the payment youself, it *may* not be binding from a contractual standpoint. There have been subsequent cases which have refined this principle over the years. To answer your specific point:

If a third-party offers to clear the debt it forms a new contract with the creditor - and this makes it more binding for all parties involved.

There is something else, however, which protects someone should they settle their own debt - The legal principle 'promissory estoppel': In a nutshell, if a full & final settlement is made onthe reliance that a creditor promises not to attempt to recover the remaining balance,the creditor would be prevented in law from going back on their promise. So, if you make the payment and the creditor tries to move the goalposts after the payment has been made, this principle states that they should be prevented (or estopped) from doing so. The principle would only be possible if both parties acted in good faith.

Here's the Wiki entry for Pinnel's case: http://en.wikipedia.org/wiki/Pinnel's_Case

And one on promissory estoppel for good measure:
http://en.wikipedia.org/wiki/Promissory_estoppel#Promissory_estoppel

Apologies for going off on a bit of a tangent, the highlighted bit is the short answer!

David.

abi1811

That's really helpful and interesting, thank you.
I'm not in a position to offer anything at the moment, but will make sure that when I am that the payments are made through a third party to be on the safe side. That's if they are willing to accept the pittance I am likely to be able to offer them, otherwise they can continue receiving my measly monthly payments until 2041.

National_Debtline

It would really need to be the third-party's money if they were to make the payment. In all honesty, I think the protection that estoppel gives people is pretty sufficient in itself. Going beyond all that, I have never come across a creditor go back on their promise once a payment has been made. Much of what I've written is very likely to be academic!

David

*Foolish*

Sorry to butt in, but what is the likelihood of a decent reduction if the debt hasn't been sent to a debt collection agency and remains with the original creditor?