How do people afford full and final settlements?

PM22

How do people afford full and final settlements?

To save for these, surely you must be paying less than all of your disposable income?

If so, how do yo get away with that with the likes of PayPlan, who are quite strict?

Am I missing something here, how do people do it?

Grumpelstiltskin

They do it by running their own DMP and allowing for savings before debt repayments. No problems, when you run your own DMP you decide what you will pay creditors not what they ask for.

sourcrates

You plan ahead of course, you stop making payments to your non essential, unsecured debts, allow the collection process to do its thing, 6/9 months down the line, hopefully all your accounts have defaulted, and with any luck will have been sold to the likes of Lowell or Cabot, or one or more of the many debt purchasing companies out there.

During this time you attempt to save some of the money you would have used as payment to creditors, stash it in a savings account or a biscuit tin, whatever your preference is, you should then work out a usable budget that also allows you to save a few quid each month to keep adding to that fund.

When your debts are sold, the new owners go through their standard range of collection letters with you, you can start payment at any time after that, and at some point, dependant on the company, they should start making you offers to settle the debt once and for all, what we call "final settlement".

Note that not all debts get sold on, and these kind of offers only usually come from debt purchasing companies, not original creditors.

Full and final settlement is incorrect terminology really, as you would be partially settling the debt, and that is how it would be recorded on your credit file, if reporting is still taking place, so "final settlement" would be the correct term.

Now these offers can vary, could be 30% off, or 60%, it is account dependant what is offered, of course there is nothing to stop you making a counter offer, you can do this with as many of your accounts as you can afford to clear.

I would always recommend self management of a DMP, the debt charities do a good job, but you must follow their rules etc, I have never been a follower of anything, so the independence self management gives you is much more preferable, and of course, you are in charge, you can`t beat that.

fatbelly

Sometimes it's through a windfall

Sometimes it's genuinely coming from a third party.

Sometimes people will set up a dmp based on basic income but save bonuses and overtime pay into a separate pot

Rob5342

Payplan and Stepchange just add unnecessary complication to what is really a simple process. 

You have a plan for yourself that inclufes what you will be paying creditors and what you'll be saving for settlement offers, and a second fictional plan that justifies what you'll be paying creditots which you use just to keep them off your back.