Full and final settlement offer

fluffydog128

Currently on a debt management plan and have sold our house to release equity to pay off our debts. We have a couple of issues with this we owe 56k and have 50k available but I am currently 8 months pregnant and our car is broken - cracked windscreen, doesn’t lock, front door doesn’t close properly and we cannot fit all 3 children in the car. Stepchange have told us we can purchase a car which I need asap but I don’t want the full and final to not be accepted and then have wasted the whole selling our house as the point was to clear our debts. We also don’t want to buy a car that is going to be unreliable as that is one of the reasons we have fallen into debt in the first place. My question is how likely are creditors to accept a full and final settlement? What is the rate that they’re most likely to accept? I need to know what budget I have for a car seen as step change can’t tell me what is an acceptable amount to pay, we really want to have this big weight lifted off our shoulders but ensure we don’t enter into the same issues we’ve previously faced. We’re currently offering 25k towards debts and aren’t forecast to pay off our debts until 2066 on our current debt management plan. What’s the likelihood of this being accepted? What evidence will we be asked for in the process of full and final settlement offers?

ManyWays

How long ago did the DMP start? Have most of the debts been sold to debt collectors?

fatbelly

My suggestion would be not to let Stepchange do this for you, and not to rush at it.

To get a decent deal, the debts need to be at least defaulted and hopefully sold on to a debt buyer.

You should first check they are enforceable and then start with a written offer of less than you can afford. They will counter-offer and then you negotiate.

You can get some ideas of percentages from posts on this forum. There used to be a large thread by Weggy but it seems to have dropped out of use.

It's here. Bear in mind info could be out of date but this was an active thread for 10 years

https://forums.moneysavingexpert.com/discussion/115430/full-and-final-settlement-help-thread

Rob5342

Yes, don't let Stepchange anywhere near that money as they will just want you to pay the whole lot towards your debts instead of trying to negotiate a sensible discount.

I agree about taking your time, if they are with debt purchasers then they will have only paid something like 10% for the debt but will be trying to squeeze as much as they can out of you.

fluffydog128

We’ve been on the debt management plan for 2 years now creditors include

PRA group

Link financial

Westcott

Lowell

Advantis

HSBC

Lendable

Moorcroft

Our issue is I don’t want the debt looming over us anymore, we want to begin moving forward with sorting our credit scores so we can move house again and get back onto the property ladder. I’ve contacted some myself but they’ve requested bank statements. We have more than the 50k we actually got 69k from the sale of the house but when you deduct 20k for a car, cost of moving and buying furniture, money to support during maternity leave we aren’t actually trying to keep much back. My main concern is that they take legal action if they find out we can afford to pay it all back. Has anyone had experience with this, can they stop our plan and demand the money if they refuse the settlement? Is there a way to ring fence some money to keep us in a better position than originally?

Grumpelstiltskin

You do realize the defaults stay on your credit report for 6 years from the default date whether you have paid them off or not, so rushing to pay them off won't change that.

No creditor can force you to send them bank statements so just tell them you are not prepared to send them.

RAS

Your ethics are admirable but you are going about this the wrong way.

Regardless of whether you pay off the entire debt or pay not another penny, your credit record will improve when the defaults drop off 6 years after they were registered.

So when fatbelly, who probably has more experience of debt management than almost all current people at Stepchange, suggests you need the debts defaulted and sold to debt collectors, listen hard.

Check all three of your credit records for the default dates, and whether the debt has been sold or assigned.

It looks like HSBC may not even have defaulted? Was that an overdraft?

You are about to go on mat leave. Anxious as you may be use that to cut back what you pay monthly and I'd suggest getting the best interest you can on that capital. Given you've already put your selves in a difficult situation with Stepchange, it may be best to self manage for a while.

PRA have a reputation for being very difficult, offering 5% discounts after years of DMP, but last year they suddenly offered 50% to some people.

fluffydog128

My main concern is that we need a car and one that’s reliable so we don’t fall into another difficult financial situation. Am I best sorting this out first then and then approaching creditors myself? Do I need to disclose the full amount I have available or should I keep that close to my chest for the negotiations

fluffydog128

I am aware that defaults remove after 6 years , however if we want to get back onto the property ladder is that something you can even look to do if you’re still on a DMP?

Grumpelstiltskin

Look the first thing you must remember is you are in charge not your creditors. You tell them what you are going to do you don't ask them what they want to know.

Would you have enough for a deposit on a mortgage?

What about all the extra costs involved in buying a house?

Would you have enough in an emergency fund to cover say boiler breaking down in the first winter at the same time as your washer needing replacing?

You have got to think things like that through .

If you don't you will only end up in the same position further down the line but with the worry of not being able to pay your mortgage and an extra mouth to feed.

SpireCaptain

How secure is your rental tenancy since selling the house? Or are you living with family? I'm not an expert but from reading on here the past few years, getting a new mortgage deal at half decent rates won't really be achievable for a number of years (perhaps year 5 after Defaults you may get sub prime lenders willing to lend but the rates will be high and you'd need a decent deposit. And with a default they'd like to see the debt settled either partially or fully) after 6 years all defaults drop off and your mortgage chances improve rapidly.

Was it Step change that suggested selling the property or had it you outgrown it as a family with the new arrival expected?

For the car situation I would trawl through autotrader etc and look for 7 seaters with decent service history and MOT. I've just had to buy an 18 year old VW Touran as my ex owns the car we have now so won't have access in a few weeks. It cost £3000 but 1 owner and low miles and never failed an MOT. You don't have to spend a lot of that money you've got for a reliable car just a lot of research and a bit of luck. Following with interest. 🤞