Making an offer of settlement

CrashOut

Hi Everyone! We have around 24k of debts on our DMP and it's not due to finish for some time. The stress has been unbearable and whilst I am 'coping', there doesn't seem to be an end. We private rent, so aren't able to sell property in order to pay the amount owed. We have been on our DMP for over two years and haven't missed a payment (paying around £360 a month). We have been told by my Wife's Dad that he is going to give us £12500 in September - and we really want to use this to try and settle with the creditors. Couple of questions: (1) is this something that SC will help with? (2) do you think they will all settle and how do we go about this? Really want to maximise the gift we are being given and make it count. Thanks so much!

Grumpelstiltskin

Have all your debts defaulted? Are any still with the original creditors?

What sort of debts are they? Credit cards, loans?

sourcrates

Stepchange will insist you pay them the £12,500 lump sum first and they will attempt to settle with your creditors on your behalf.

Now this is something I would not be comfortable with, for the following reasons:

(1) Stepchange are creditor funded, so have an obligation to see your creditors get a fair deal, that may not always be in your best interests.

(2) there will not be that much negotiation taking place.

Have your debts defaulted and have they been sold to 3rd party debt buyers?

If the answer to either question is no, then this is not the time to settle these accounts, as the best you will get is maybe 10/20% off, after time has passed and a sale to a 3rd party has gone through, you can be looking at 40/60% off.

Making CCA requests to all lenders is a "must do" first step in the dance regardless.

ManyWays

It would help a lot if you can say who the current creditors are, as some debt collectors are easier to negotiate with than others

Rob5342

Don't let Stepchange get anywhere near that money as they will want to pay the whole lot to your crediors and will have no interest in reduced settlements. 

As mentioned above, don't even think about making any settlement to anyone until they have defaulted and been sold on ans they have produced the cca after you have requested it. 

np1v08

I hope you don't mind me jumping in with a related question. I also have a DMP, which is due to end in 4 years, and recently I've been receiving regular offers to settle certain debts (ones that have been sold on) at a discounted rate (typically 20/30%). Until now I've ignored all the letters because a) I don't have the spare cash to take them up on the offer and b) I thought this wouldn't be allowed by PayPlan who manage my DMP (brilliantly, I might add). I assumed it would be considered a 'preferential payment', which isn't allowed. 

However, I will in the near future (some time next year) be able to pay off my DMP fully thanks to an unexpected property inheritance. My question is: if we accept a reduced settlement offer from a creditor, and this shows as 'partially settled' on our credit file, is this going to adversely affect our credit score/credit-worthiness for another 6 years? In other words, if our goal is to get back on track with our credit history so we can apply for a mortgage, or just have a credit card again, for example, would this not be advisable? Does anyone have any experience of words of wisdom? Many thanks in advance. 

RAS

If your debt already has a default recorded against it, it makes no difference if you pay it off, never pay a penny towards it or make a partial settlement.

Payplan will probably insist on sharing any money you receive pro rata between your creditors. Which could cost you shed loads.

Time to self-manage, develop some negotiating skills and settle for less. Your current creditors paid 15-30 percent of the book value to buy your debt. They offer 30% off you ask for 55% and hopefully meet some where in the middle.

fatbelly

np1v08 said:

I hope you don't mind me jumping in with a related question. I also have a DMP, which is due to end in 4 years, and recently I've been receiving regular offers to settle certain debts (ones that have been sold on) at a discounted rate (typically 20/30%). Until now I've ignored all the letters because a) I don't have the spare cash to take them up on the offer and b) I thought this wouldn't be allowed by PayPlan who manage my DMP (brilliantly, I might add). I assumed it would be considered a 'preferential payment', which isn't allowed. 

However, I will in the near future (some time next year) be able to pay off my DMP fully thanks to an unexpected property inheritance. My question is: if we accept a reduced settlement offer from a creditor, and this shows as 'partially settled' on our credit file, is this going to adversely affect our credit score/credit-worthiness for another 6 years? In other words, if our goal is to get back on track with our credit history so we can apply for a mortgage, or just have a credit card again, for example, would this not be advisable? Does anyone have any experience of words of wisdom? Many thanks in advance. 

Settlement deals are always available particularly from those firms who have bought your debt for 10p in the £

You would generally be looking to settle at around 30p in the £, which is the preferred way of discussing settlement rather than a 'discount'

PayPlan may prefer you to pay 100% over many years, as they get a 10% rake-back. Best to negotiate these things yourself using National Debtline resources and starting with a formal cca request

The whole entry drops off your credit report 6 years after the default so settled default/partially settled default isn't going to make much difference

Preferences only matter if you are going insolvent, which it doesn't sound like you are.

Rob5342

I agree with the above. Make CCA requests first, if they can't produce the CCA then they can't enforce the debt and you can simply stop paying. Next ditch Payplan and start managing it yourself. They csn be useful in the early stages of a dmp but with it comes to agreeing settlement offers they just make the whole process much more difficult as they act in the creditors best interests rather than yours. Hold out for a good settlement, the debts will drop off your credit report 6 years after the default date, so if they decline your offer then reduce your monthly payments and try again in six months or a year. As Fatbellly says they will have bought your debt for 10% of it's value, so ehat they call a 30% discount actually means they will accept making 600% profit instead of 900% profit. You may also consider making affordability complaints in parallel. 

np1v08

Thank you so much to @RAS @fatbelly and @Rob5342 for your replies. 

I've only just replied now because actually all your collective responses and advice were a bit of an eye-opener to me! I've been plodding along with my DMP since August 2019, and I still have £19k to pay off across 12 accounts. I felt safe with PayPlan, and quite honestly, they've taken so much of the stress (and the admin) out of dealing with all my creditors. Consequently, I've not really given enough thought to what's going on in my credit files (other than knowing they looked *really* bad!!).  I'd also not considered whether I could manage my DMP myself – especially now that my financial circumstances will change somewhat next year when the house has gone through probate and has been sold (unlikely this side of 'Xmas). 

My first revelation was that I didn't know that an account with 'default' marked on it will drop off after 6 years regardless of whether the debt is settled or not (partially or fully). So, this afternoon, I took out a free 30-day trial for CheckMyFile, and I discovered the following: of the 12 problem accounts, I have 3 with first defaults registered in September 2019, 2 with first defaults registered in October 2019, and 2 with first defaults registered in January 2020. So, that's 7 that will be dropping off my files over the next 5 months. The other 5 have either not been registered as being in default or the date is incorrect (using the ICO advice of once payments have been reduced or missed for 3-6 months).  I will write to the companies to request the records are corrected. If this happens, all the 12 accounts will have disappeared from my credit files after January 2026. 

My second revelation was if the company can't produce the CCA, they can't enforce the debt. I had no idea.

My thinking is that I should firstly ask for the default dates on the 5 accounts to be added/corrected. Then, when I know that's done, I should ask for the CCAs, especially for those accounts that have been sold on. If any of them can't be produced, I could then stop paying them or reduce payments significantly. What I'm still not sure about is what does it mean if they do have the CCA (e.g., Halifax or M&S, who will certainly have them)? Once the default reaches its 6-year anniversary and the record drop off my credit file, can they still pursue me legally with the potential for a CCJ if I don't pay up? 

 I do recognise that PayPlan would try and make me repay as much as possible to my creditors, and I would be better off negotiating this myself (thanks for the advice). Funnily enough, at the beginning, PayPlan were trying to persuade me to go down the IVA route, but I resisted, and I have tried really hard over the last 6 years (have repaid £37k).  

Does this sound like a sensible plan potentially? 

Thanks again.

RAS

Even if you'd not paid a farthing towards the debt and the 6 years since the default had passed, they can still sue for a CCJ.

There's one live thread here about someone who misunderstood and didn't defend court papers for a very old debt, long since statute barred. If they responded/defended reminding that the debt was statute barred, they wouldn't have got the CCJ.

As you've been paying, the debts won't be statute barred and it's easier for them to get CCJs. 

So you've options:

Start with CCA requests and a few months later stop paying those who can't find the CCA. Just possible some will never find them but be prepared to defend any court action.

You should receive some reduced offers on these debts, consider bargaining and then paying off those as full and final settlements. It make no difference to your credit record whether it's reported as partial or full settlement as long as they confirm in writing that they will not pursue or sell the debt. Keep the record.

You will need to leave Payplan to stop paying or settle debts on an individual basis.

Edit, it's probably worth checking individual CRAs in case they have more accurate records on defaults. It can be done for free.