Fully settling one debt, partially settling another

Blufish

Hi wise owls,

I have a small but potentially positive predicament.

I have a DMP with Step Change, for two debts totalling around £3900. My great aunt has left me £2500 in her will, which I'd like to offer my creditors by way of a partial settlement.

Debt 1 is £3830 and is with Rossendales. Debt 2 is a whopping £70 (down from £250) with Capital One.

I am sorely tempted to clear the Capital One balance in full, as for such a tiny amount it seems a bit silly to offer a partial settlement and give my credit rating another kicking, then use the rest of the money to offer Rossendales by way of partial settlement.

Step Change have warned me against this as it constitutes unfair treatment, and may risk Rossendales rejecting my offer.

What does everyone here think? The Rossendales debt is very old (and has dropped off my credit report) although the DMP is only a couple of years old - I was actually keeping up minimum repayments on the credit card but Step Change wrote to Capital One and sent it into default when I opened the DMP simply by way of process.

I don't want to risk jeopardising the offer, but I can't shake the frustration of a further black mark on my file for such a comparatively small sum... Would really appreciate any advice!

Thank you all so kindly. I'm sorry for silly questions. I know I'm very lucky to be in such a privileged position and to have received any money at all, and I shouldn't be so pent up and obsessed about my stupid credit rating as once the debt is gone one way or the other I can start rebuilding it. I'm just trying to think of damage control measures...

Willing2Learn

Hi Blufish and welcome to the forum

If you want to settle your accounts in the way you have stated, then you will have to self-manage the remainder of your DMP, as StepChange would not be able to support any settlement offers that are not made pro rata.

Since the Rossendales account is very old (having dropped off your credit report), I recommend submitting a CCA request to them before you make any offer. It may turn out that the old account does not have compliant paperwork. (I am assuming the Rossendales account is an eligible account such as a credit card, catalogue and most loans).

By the way, having CapitalOne default your account at the start of the DMP is good news, as it means the toxic account is removed from your credit file nice and early.

fatbelly

A dmp is an informal solution and, from where you are now, you would not need a formal solution, like DRO or bankruptcy where a preference is an issue.

So basically stepchange are wrong and I do hope their rake-back from dmp payments is not influencing their advice.

You are not likely to get a discount on a £70 debt and it's not worth the effort to try. Just keep £70 to one side and you can settle that at any time.

Now is the time to start the process of making an offer to the owner of the Rossendales debt. Hopefully that is a debt that you can get a settlement on. Who is the owner?

Start below what you can afford. For example if you can afford 60% start at 30% and do it in writing using the National Debtline factsheet.

Just tell them the money is coming from a third party.

If this is a consumer credit debt you may want to check they have the relevant paperwork and do a CCA request - again there is a standard letter on the the National Debtline website.

Don't worry too much about your credit rating - it sounds like the damage was done a long time ago.

Blufish

Thank you so much for your advice so far, everything you've said makes so much sense.

I have an appointment scheduled with the Step Change settlements team, but from what you're saying it sounds like I'd be better off trying to negotiate it myself. I suffer with terrible anxiety as I'm sure most people here can sympathise with, and so the offer of someone else taking care of everything sounded really good to me, haha! :rotfl:

I'm really embarrassed, but the Rossendales debt is council debt. It was an old benefit overpayment, I can't get into the exact circumstances as it's a long and unpleasant story. I'm extremely lucky it hasn't been worse. But yeah, it's entirely my doing - circumstances weren't great and rather than dealing with problems I just hid until it got to breaking point.

I'm not sure if that changes the manner in which I should make an offer?

Thank you so much again for all your very helpful advice!

Willing2Learn

Unfortunately, I don't think a debt to the council for a benefit overpayment is eligible for a CCA request. (Hopefully fatbelly or sourcrates will drop by soon to confirm)

If you were to choose to take over negotiations yourself then you would not need to talk to anyone. Everything is done by letter (via Royal Mail). There is a letter template you can use to make settlement offer. And the full guidance is linked below:
https://www.nationaldebtline.org/EW/factsheets/Pages/fullandfinalsettlementoffers/lumpsumoffers.aspx

Have a good read of the guidance and see how you feel. It may reduce your anxiety.

In the meantime, I recommend depositing the £2,500 in to a Nationwide FlexDirect account as it pays 5% APR in interest (that is more than £10/month). You could leave the money in the account until Rossendales decide to accept an offer. (The account does require a minimum monthly deposit though)

fatbelly

Blufish wrote: »

I'm really embarrassed, but the Rossendales debt is council debt. It was an old benefit overpayment, I can't get into the exact circumstances as it's a long and unpleasant story. I'm extremely lucky it hasn't been worse. But yeah, it's entirely my doing - circumstances weren't great and rather than dealing with problems I just hid until it got to breaking point.

That's what I was a bit concerned about. Housing Benefit I assume. They are unlikely to accept an offer. (Nor is it subject to the Consumer Credit Act. And they don't appear on a credit check)

Did stepchange not tell you that? Presumably they know what the debts are?

You might be best just to keep the dmp going. There will be no interest on the HB overpayment and nothing on your credit report.

Willing2Learn

There you go. fatbelly is the wisest of owls!!

Karonher

Could you make an offer to pay off debts with a F & F and by the time a price has been agreed you could have saved enough to pay off the £70 - or less if they agree to a F & F - and use the money you have been given to pay off the bigger one.

fatbelly

I've had a bit of a further thought. I've never heard of a council settling in that manner. But my experience is with my council (unhelpful, inflexible). Yours might be better. Have a chat to the stepchange team and se what experience they have of your council

Blufish

Oh blimey. This is slightly concerning.... Step Change never mentioned anything like that to me, they've only said they think I hit their criteria for settlement. The debt is very old, back from when I still lived in Farnham. It was sold to Rossendales shortly after I defaulted - I've since relocated and no longer receive any benefits. I'll have to speak to Step Change about this and see what they say.

Thanks so much everybody! Hopefully we'll get to the bottom of this...