Partially settle defaults or not bother?

fompas

Hello!

Looking for a bit of advice... I'm currently on a DMP with the following outstanding:

HSBC C/Card: £275
HSBC old overdraft: £2100
Natwest old overdraft: £1379
Halifax C/Card (now with DCA): £1300
Barclays partner finance (now with DCA): £900
Pounds to Pocket loan (I know!!!) £150

These have all defaulted now because of the DMP. I've kept this to myself for a long time (everything defaulted in around 2014) but recently a family member has found out and is willing to lend me the money to sort this out.

Obviously I'll have to pay them back so want to borrow as little as possible... They're happy to lend me the full amount, but I know that sometimes you can offer less than you owe a creditor to settle the debt (full and final I think?) and was wondering if I should do this so I have to borrow less money from family member?

Just wondering if it will hurt my credit file even more (if that's possible!) to settle for less than paying it in full.

Also one other bit of guidance... if I should offer less, how much?! Or do I just ask them what they'd take?

Thank you so much!

National_Debtline

Hi fompas

Making a full & final offer certainly sounds like it could be an option for you. In terms of your credit file, most creditors will mark the debt as partially satisfied if you do this. You can ask them to show the debt as fully satisfied but there is no obligation on them to do it. If a debt is shown as partially satisfied, it means someone carrying out a credit check will see you paid an agreed amount but it was not the full amount that was owing.

I think what you need to consider is, if you already have a default damage has already been done to your credit file. Yes fully satisfied will look slightly better, but will it make that much difference in the scheme of things? Also bear in mind that a debt will drop off your credit file 6 years after the date of the default.

With regards to how much you should offer there are no hard and fast rules, but you should be making the offer, not asking them what they will accept. Make sure you offer each debt a fair share of the lump sum you have available. Your bigger debts will get a bigger offer than your smaller ones. You can find out how to calculate your offer and a sample letter to use here https://www.nationaldebtline.org/EW/factsheets/Pages/fullandfinalsettlementoffers/lumpsumoffers.aspx.

Susie
@natdebtline

fompas

Hi Susie,

Thanks for that. Do creditors put much weight to a fully satisfied vs. a partially satisfied account? I'd hope that with paying these debts off that my credit rating would start to improve and I wouldn't want to hinder that with partially satisfied markers

Also, you mentioned about sending them letters - should I do everything in writing rather than over the phone/email?

Thanks

Suseka97

Hello fompass.

There's a full and final settlement thread on this forum somewhere - it's been running for years, so it's pretty big, but if you look back over the more recent posts you'll probably find a lot of useful information. There are also template letters for F&Fs on the NEDCAB site (just google it) -these are important because you must put everything in writing and use the right words so that if a creditor does take an F&F they don't do a sneaky on you and sell the balance left on.

If you've been defaulted for the last 3 years or so, you might get some decent discounts, but it also rather depends on how much you've been paying them in your DMP. If they've been receiving regular payments I would hazard a guess they'd not be too inclined to discount much, if at all. From what I've read of others going down this route, they've tended to go self-managed first and drop creditors down to tokens or no payments for x number of months, then hit them with an F&F offer.

As to the amount to offer - kinda depends on you really - don't let the creditors decide and don't offer silly figures. I'd go with a 40% to 50% but before you even do that, send of CCA requests to all of them. You would effectively have to go self-managed, because a CCA request forces the creditor to stop collection action until they've proven they have the right paperwork to 'enforce' the debt. If they do, then start the offers -if they don't, well that's an entirely different scenario. If they can't prove the debt is enforceable then you can pretty much tell them to go away (nicely) and focus on the others - or you can make a mega discount offer if you are so inclined to do so. Go and have a look at the DMP mutual support thread and search around for the CCA request posts - you'll see a good few of us are doing that ahead of offering F&Fs.

As to the credit file query - all defaulted accounts will eventually end up with a 'partially satisfied' or similar marker. So whether you pay the full balance now, or a reduced amount makes no odds. The default will drop off your file 6 years on from the date it was entered - regardless of whether you still owe money or not.

sourcrates

fompas wrote: »

H
Also, you mentioned about sending them letters - should I do everything in writing rather than over the phone/email?

Thanks

To have a legal leg to stand on, should one or more of your creditors or there agents, decide to pursue you for the remaining balance, you thought had been written off, you do absolutely everything in writing, and keep copies for 6 years.

fompas

Thanks guys, the creditors get the following:

HSBC C/Card: £275 - £5 pcm
HSBC old overdraft: £2100 - £13 pcm
Natwest old overdraft: £1379 - £10 pcm
Halifax C/Card (now with DCA): £1300 - £10 pcm
Barclays partner finance (now with DCA): £900 - £8 pcm
Pounds to Pocket loan (I know!!!) £150 - £5 pcm

CCA? I've not heard of that I shall have a look. Does that effectively write the debt off or something? Does it ever work?

Ta

Suseka97

Okay, so if I've got my maths right you've got debts amounting to just over £6k and paying £51 pcm which means if nothing else changed you'd be paying your DMP for another 9 years, on top of the 3 years you've already done. Yikes! Are you with one of the free DMP companies (hope so).

No - a CCA request refers to the Consumer Credit Act and if Sourcrates pops back on he'll be able to give you the lowdown on what that is. He's one of our experts over on the DMP mutual support thread and is very knowledgeable on these matters. No debts get written off as such, well unless they are 'statute barred' - but if you send off a CCA request to one of your creditors, especially those with a DCA, they have to do a search and provide you with documentation that proves the debt is an enforceable one. Some can (and the paperwork required to prove this differs depending on the age of the debt) and some can't. Those that can't provide any of the relevant paperwork have to tell you so and inform you that the debt is not enforceable -but of course that doesn't mean you don't still owe it. What it does mean is that no-one would be able to take you to court to pay up and you could effectively walk away.

It works for some - hence my suggestion to do a wee search on the DMP threads, but not always. What it gives you is a bit of breathing space for one - because they have to stop collection practices whilst investigating. You'll lose nothing by sending CCA request off and if they come back enforceable you can simply carry on as you were, or try for some F&Fs (again, nothing to lose by doing either).

fompas

Yes your maths are spot on! haha

OK then, I've found the CCA template letter so may give that a shot. Would I be better trying to arrange a F&F via letter or speak to them on the phone and make them follow up with a letter confirming it? I'd like to get it sorted as soon as possible and I know letters tend to take longer than a phone call haha.

fompas

And yeah I'm with Stepchange, I looked into them before I signed up

sourcrates

fompas wrote: »

Yes your maths are spot on! haha

OK then, I've found the CCA template letter so may give that a shot. Would I be better trying to arrange a F&F via letter or speak to them on the phone and make them follow up with a letter confirming it? I'd like to get it sorted as soon as possible and I know letters tend to take longer than a phone call haha.

The CCA request itself can take a month or more to complete, sometimes even longer.

Suseka97 sums it up nicely above more or less what can be gained from this action, you should ideally do the request first as a pre-cursor to making full and final offers to your creditors.

However, if you want this over quickly, and are willing to accept whatever discount the DCA deems fit, then go ahead without the CCA requests, its entirely up to you.