Quick question about a full and final offer

The short of it is I have 27k in debt spread across 3 cc's and an overdraft, I have not missed a payment or defaulted on anything but I have zero cash at the end of the month and interest charges mean I cannot make a dent in the debt. With the current cost of living spiralling and energy costs rocketing this is not sustainable so I'm trying to be proactive.

So if I miraculously (through family) managed to come up with 13.5k (half) and offered it around pro-rata would that be acceptable? Do I need to default on the debts first before I make an offer or can I just approach them out of the blue?

Comments

  • sourcrates
    sourcrates Posts: 28,493
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    edited 16 September 2022 at 4:04PM
    I have just read your other post regarding stepchange, you do realise you have posted it in the stepchange advisors thread don`t you, so any replies will be from them.

    They are mainly funded by the creditors themselves, but are well known for providing good, impartial advice.

    An IVA can be a double-edged sword, the pros and cons of them can easily take forever to fully explain, basically only look at one if you own a home, and have massive debts you cannot pay, as an IVA is your only alternative when you cannot declare bankruptcy.

    As regards settlements, again, a topic not easily covered in a short space of time, whilst your accounts are active and due for payment, only full settlement would be entertained, they must default, and be sold on at least once before anyone will entertain the kind of discount you are looking for.

    Being pro-active in the first instance is not something that is always helpful where debt is concerned, there is plenty of help out there, but usually you either have to default first, or at least be a few months behind with your payments, otherwise they don`t assume you're in trouble, so won`t help.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • BDeluxe
    BDeluxe Posts: 30
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    edited 16 September 2022 at 4:35PM
    I was aware of the StepChange board, I asked because they don't make clear what happens at the end. They just say they last 5 or 6 years whilst not going in detail about what happens at the 5 year point.

    If you've gone through the pain of an IVA (+ the costs) and then have to fill the shortfall with a mortgage then I think that should be clearer.

    I was advised not to use my mortgage to pay off debt which is odd when it's what an IVA requires you to do with the added detrimental affect on your credit record. IVA's are terrible when you drill down into what actually happens, in my mind they're just a vehicle for another 3rd party to profit from your misery. 
  • Rob5342
    Rob5342 Posts: 1,325
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    What it really comes down to is how likely they think it is that they will get their money back. If you've been making the full payment (including interest) each month then they'll think you are likely to carry on like that and won't be all that likely to accept a full and final offer. The longer you make reduced payments for the more likely they will be to accept a reduced payment. If it defaults then it's likely to be sold to a debt collector a fraction of the cost, and they would be much more open to a reduced offer.

    Sometimes its better to get a default and just get it over with instead of struggling with it perpetually.
  • sourcrates
    sourcrates Posts: 28,493
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    BDeluxe said:
    I was aware of the StepChange board, I asked because they don't make clear what happens at the end. They just say they last 5 or 6 years whilst not going in detail about what happens at the 5 year point.

    If you've gone through the pain of an IVA (+ the costs) and then have to fill the shortfall with a mortgage then I think that should be clearer.

    I was advised not to use my mortgage to pay off debt which is odd when it's what an IVA requires you to do with the added detrimental affect on your credit record. IVA's are terrible when you drill down into what actually happens, in my mind they're just a vehicle for another 3rd party to profit from your misery. 
    Yes, and I would agree with you on that score, they are only useful in a very small minority of cases, however, the regulation of such agreements leaves a lot to be desired, virtually anyone can set up as an IP and flog IVA`s, which is why the failure rate is so high.

    Just for clarity, in year 5 you have now 2 options, you can try and re-mortgage, and if that isn`t possible another year of payments is the norm, some companies now also offer loans to settle these arrangements early, the re-mortgaging is not compulsory, you can instead opt for another year of payments, it`s just the re-mortgage option is pushed harder, mainly due to some broker arrangement your IP may have in place I would has at a guess.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing [email protected]. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
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