Advice on Early Settlements for a Default

runforlife

My experience is if you continue to pay somewhere near the amount the contractual amount it’s more difficult to negotiate a substantial discount. For eg I have 2 debts with Cabot where last April I informed them i was reducing the payments from £65 and £50 to £10 each because of the insecurities caused by Covid. Last Oct and again in Nov they wrote offering a 70% discount. Previously I’d asked for 40% and was turned down. 

moneyworrier2021

At the moment, it's £100 a month down from £300 before it defaulted. It's going to take years for them to recoup 100% of it.

Ive recently thought about even just continuing to pay the minimum £100 as there's no interest and it falls off my credit file regardless in 2 years from now. Only urgency for me is my credit file improving. I was able to get a mortgage last year but was a high 5%. 

Maybe better to just fix another 2 year term and then when the default drops off, be open to better rates in the market.

moneyworrier2021

moneyworrier2021 said:

How long of a gap do people leave between offers of an early settlement.

Say I owe the 8K, At the end of April when I have about £5K saved, should I go in with my first offer of 30% £2,400. I assume they will accept and decline within a few weeks. If declined can I wait say 6-8 weeks before making my 2nd and final offer of 60% £4,800 to give me more time to buffer my bank account or should I just wait until I have my buffer waiting before making any offers.

Just bumping my question above on gaps between making offers

runforlife

moneyworrier2021 said:

At the moment, it's £100 a month down from £300 before it defaulted. It's going to take years for them to recoup 100% of it.

Ive recently thought about even just continuing to pay the minimum £100 as there's no interest and it falls off my credit file regardless in 2 years from now. Only urgency for me is my credit file improving. I was able to get a mortgage last year but was a high 5%. 

Maybe better to just fix another 2 year term and then when the default drops off, be open to better rates in the market.

£100 is still quite a large percentage of what they want. Remember paying £300, £100 or £10 won't affect how your credit file is reported. A default is a default. It'll improve considerably in 2 years. 

moneyworrier2021

runforlife said:

moneyworrier2021 said:

At the moment, it's £100 a month down from £300 before it defaulted. It's going to take years for them to recoup 100% of it.

Ive recently thought about even just continuing to pay the minimum £100 as there's no interest and it falls off my credit file regardless in 2 years from now. Only urgency for me is my credit file improving. I was able to get a mortgage last year but was a high 5%. 

Maybe better to just fix another 2 year term and then when the default drops off, be open to better rates in the market.

£100 is still quite a large percentage of what they want. Remember paying £300, £100 or £10 won't affect how your credit file is reported. A default is a default. It'll improve considerably in 2 years. 

If it was you, what would you personally do?

Just continue to pay £100 a month for 8 years until its cleared or try and go for early settlement? Ideally 30% but more likely 60%

runforlife

I'd probably reduce it to token payments, wait a good while and offer a low settlement. 

moneyworrier2021

It's tricky because I have no clue whether getting a F&F agreed soon and 'partially settling' my the default will effect me getting a better mortgage rate next Feb when my fixed rate ends. 

If I knew for certain it wouldn't then I won't bother

moneyworrier2021

Hi All

Wanted to Bump this and ask a question about F& F payments

I'm down to £7.5K owing and In a months time I will have around £3K saved aside. Thats around 35%-40% total of what is owed.

if I send the first letter to Moorcroft, can I lay it on and say I've received an inheritance payment for £3K (which I haven't) I am willing to settle for that because I currently work in retail on furlough and Im worried that once that ends in September, my employer may let me go so am unsure about job security? I want to use what I have to clear the debts before I am unable to make any payments in the future?

Do these companies want proof of what im saying?

hev3049

This is the letter I sent to my creditors - you dont have to send your up to date financial statement

Dear Sir/Madam
Without prejudice

Account No: 

I am getting advice from National Debtline on dealing with my financial situation and choosing the right debt solution for me.

I am writing about the money which you are claiming on the above account. I have enclosed my up-to-date financial statement. I can confirm that I am unable to pay the money which I owe in full.

However, I can raise £...... and I want to offer this as full and final settlement of the account. I am making this offer on the clear understanding that, if you accept it, neither you nor any associate company will take any other action to collect or enforce this debt in any way and that I will be released from any liability.

A family member is gifting me some money which I will not be repaying as I don’t have spare money to pay them off with - I will be using the money to pay off some debts. I would be grateful if you could accept this offer as it is my biggest debt - if not I will use the money to pay off another debt and carry on paying you £1 pm.

If you accept this offer, please confirm that you will mark my credit reference agency file to show that the above account has been paid and closed. I can pay the amount I have offered within of receiving your written agreement of this offer. Please give me details of how I can pay. As is my right please do not ring me as all correspondence should be by email or letter.

I look forward to hearing from you.

(Please note, all further correspondence should be addressed to me. National Debtline are a self-help agency and are not acting as my representative).

Yours faithfully

moneyworrier2021

Where I’m currently paying them £100 a month, if they don’t accept the offer then I’ll just continue to pay that but won’t attempt to make any further offers