Full & Final settlement - what percentage?

cleopatra55

We would like to offer a 'full & final ' settlement payment to our creditors, both personal loans and credit cards, all unsecured. We are able to borrow money from a relative which would enable us to pay back 50% of all debts owed. We have the pro-format letter but are not sure what percentage would be likely to be acceptable, is there anyone who has successfully done this and could advise us if 50% is likely to be accepted.

lieutenant_dan

would have thought 50% is way too low, in the region of 75/80% probably more realistic, but varies from lender to lender and you never know, you could get lucky and have a 50% offer accepted, highly unlikely though.

deary65

How to work out offers of payment in full and final settlement

You may have a lump sum that you need to divide up amongst several creditors. The usual way of doing this is to make "pro-rata" offers. This means that each creditor gets a fair share of the money available. The creditor you owe the most to will get the biggest share of the money and the creditor you owe the least to will get the smallest share.

1. Find out the exact outstanding balance you owe to each creditor
2. Use the formula to work out how much to offer each creditor
3. Use the following example on page 2 to help you.

FORMULA

LUMP SUM AVAILABLE x EACH DEBT
÷THE TOTAL AMOUNT YOU OWE TO YOUR CREDITORS
= OFFER TO THE CREDITOR

EXAMPLE
You may have £10,000 owing to 4 creditors. You can raise a lump sum of £4,000.
You owe:

£2,300 to mastercard
£ 1,200 to a catalogue company
£ 4,500 to a loan company
£ 2,000 to the bank.

Use the formula:-

£4,000 (lump sum available) x £2,300 (debt to mastercard)
÷£10,000 (the total amount you owe to creditors)
= £920 (offer to mastercard)

Your offer to mastercard is £920. You then do the same calculation for each creditor, using each individual debt in the calculation.
Your offers to your creditors should look something like this:-
OFFERS TO CREDITORS BASED ON A FULL AND FINAL
SETTLEMENT OF £4,000
CREDITOR
DEBT
FULL & FINAL SETTLEMENT OFFER
MasterCard
£2,300
£920
Catalogue
£1,200
£480
Loans
£4,500
£1,800
Bank
£2,000
£800
Total
£10,000
£4,000
4) Send offer letters to all your creditors along with a table like the one shown above. It is helpful if creditors can see that they are all receiving an offer of a pro-rata settlement. Then they know they are all being treated the fairly. If some of the creditors refuse, then write to them again and ask them to reconsider. Point out if any of your other creditors have accepted the offer and explain your circumstances again. If your creditors still refuse Phone us for advice and see what other options you might have.
Remember: Do not pay the lump sum to any creditor that does not agree your offer in writing.

cleopatra55

Thanks for confirming the formulation of calculating the amounts for each creditor. The problem we have is that the total debt is so high (£88934) and the amount we can get hold of is £45K, pro-rata payments work out at just about 50% for each - we're not sure if there's any chance of this being acceptable? Just trying to get a feel if anyone else had tried this type of offer with any success.

CLAPTON

what will be acceptable depends upon the circumstances
of which you have given no information

like
have the debts been defaulted
when
how much are you paying now in relation to the debt
for how long have you been paying reduced amounts
are they with DCAs or the original creditor

cleopatra55

Hi, here's a bit more info on our situation.
We have managed not to go to default on anything yet, all debts are still with original creditors and all of them have agreed our essential costs and income information, and are accepting very small payments
i.e. Cap 1 debt is £11442, they have accepted £23 per month for 6 months, we are currently in month 4, so that's why we're now looking at trying to offer something better when our relief time is up.

Realise our credit rating would be scarred for a while, but realistically, if we can get this sorted and hang on to our house, we can work and live without credit for long enough for a repair, and it would be great to not have to use credit again anyway.

Thanks for your reply, any suggestions welcomed.

nomoneynomoney

Hi Cleopatra
I don't know how they decide if they will accept your offer or not. I have some debts still with the original creditor and they refuse anything less than 85-100%.
Some with DCA have accepted between 25 and 50% and others with DCA wanting 100%.
I think start low and you can always increase your offer. have you read the thread about requesting a copy of your CCA.You don't want topay the wrong people.

1canshortofasixpack

Hi cleopatra

I had a couple of creditors who accepted an offer of 66% the rest just kept on hounding me although one of them recently offered me the chance to settle with 75%. They are now on dmp with cccs.