Full and Final Settlement

Indebtandwanttobefree · 1 August 2016 at 6:46PM

I have got a query that I would like some advice for. I have an overall debt of £10,895.41, owed to 4 creditors (2 of which are Cabot). I have been paying them back at £1.00 per month each for the last 5 years. I am in no financial situation to increase the payments for the foreseeable future. My debts are as follows -
£2373.11 - Cabot (Lloyds Credit Card)
£2063.49 - Apex (Lloyds O/D)
£4652.46 - Cabot(Lloyds loan)
£1806.35 -Arc Europe (MBNA Credit Card)

Recently Cabot wrote to me offering me to pay 30% of my debt of £2373.11 to them, to update my record as 'partially settled' with a nil balance outstanding. Once I have made the payment they will send me a letter of confirmation that the account has been cleared - this offer was for 14 days running from 16th July - 30th July 2016.

I contacted Step Change for advice to ask for advice and they said I was eligible for a debt relief order. I replied that I would rather offer all debts a Full and Final Settlement as a relative has offered to loan me £2500 - £3000 to clear my debts. The response was that that amount was not enough to offer for F and F settlements, only option is DRO. I then asked about accepting Cabot's offer of 30%. They replied saying that it was not good as it would show me to be discriminatory against my other creditors. I thought that it would be good to at least get rid of one of my debts.

I then rang up Cabot asking whether they would consider 30% of my loan, as a F and F, they said no but they would accept 80% or if I sent a financial statement maybe more. I then said about the 30% offered that I couldn't raise it before the deadline. They said that this was ok and that it could be extended. But I am worried what situation it will lead me to. After agreeing to payoff one of the debts out of 2 owed to the same creditor? Are they going to backtrack saying that the offer has expired and money is taken to just pay off some of the debt owed not clearing the balance? I am tying myself in knots with this.

Do I -

1. Do I accept the 30% offer, would this be counted as discriminatory - if so what would happen?
2. Should I then write to the other creditors offering 15% to all i.e. start low
3. Should I write to all creditors including Cabot who made me an offer, asking them for a 15% amount.

Please any advice on what I should do, would be very appreciated

snowbean · 1 August 2016 at 7:14PM

The first thing I'd suggest, is to make sure that whatever you do, don't pay any amount at all as a settlement figure, until you have a written confirmation that the amount will be accepted as final settlement, and that no-one will pursue you for the remaining balance.

I had a similar problem with Stepchange, in that they said to me that they weren't prepared to negotiate and settlement figures on my behalf if the amount was not at least 70% of the debt. So I decided just to negotiate with the creditors myself, only one of which has said that they will only discuss the matter with SC.

It's kind of discriminatory to pay differing amounts to each creditor, but in reality, it's unlikely that they'll all agree to the same percentage, and that's not your fault. Even if only one agrees to partial settlement, you could argue that all others will still benefit, as your SC payment would stay the same, meaning that they'd each start getting a larger amount and the debts will be paid off sooner.

sourcrates · 1 August 2016 at 7:17PM

Do the debt relief order and save your money !!!

National_Debtline · 2 August 2016 at 12:17PM

Hi

Showing preference to one creditor by paying a lump sum is only really an issue if you later decided to use an insolvency process such as the DRO. If a creditor is prepared to accept a low percentage that’s up to them really.

If you want to make offers to all creditors the generally accepted way to do it is to see how much you can afford as a lump sum and then share the money out on a pro rata basis. Starting low is a good idea as you can always increase offers necessary.

Snowbean makes some goods points as you can make the offers yourself but make sure you have confirmation of acceptance in writing before you pay anything. There is a factsheet on full and final settlements here which might be useful:

www.nationaldebtline.org/EW/factsheets/Pages/fullandfinalsettlementoffers/lumpsumoffers.aspx

The DRO is certainly an option to consider carefully first though as sourcrates points out.

James
@natdebtline

fatbelly · 2 August 2016 at 12:33PM

sourcrates wrote: »

Do the debt relief order and save your relative's money !!!

corrected that for you

sourcrates · 2 August 2016 at 12:39PM

fatbelly wrote: »

corrected that for you

Yes exactly !!!!!

posidom · 2 August 2016 at 4:39PM

My situation is similar enough to ask a related question in this thread. I hope the OP doesn't mind as it may be helpful to them too.

What are the consequences of paying the debts in full or partial (with confirmation of final settlement in all cases)?
(a) all debts paid in full,
(b) some full, some partial
(c) all partial

I'm thinking in particular of credit score improvements, how soon will improvements kick in (eg. if full, is it 6 years after default clock started?), etc.

National_Debtline · 2 August 2016 at 4:54PM

posidom wrote: »

My situation is similar enough to ask a related question in this thread. I hope the OP doesn't mind as it may be helpful to them too.

What are the consequences of paying the debts in full or partial (with confirmation of final settlement in all cases)?
(a) all debts paid in full,
(b) some full, some partial
(c) all partial

I'm thinking in particular of credit score improvements, how soon will improvements kick in (eg. if full, is it 6 years after default clock started?), etc.

Hi posidom

In terms of their knock-on effect on your creditworthiness, scenario (a) would be the best and (c) the worst. If any of the accounts in question have already been defaulted, they will drop off your credit file six years after said default, regardless of whether any subsequent settlement has been full or partial.

Once an account has been closed as a result of a settlement, there is an obvious effect on how lenders regard you as you then have one less outstanding commitment for them to take into consideration. However, I can't comment on the effects on credit "scores" as they are measures created and used by the credit agencies themselves - lenders will use their own individual criteria for making lending decisions.

Dennis
@natdebtline

bsclp118 · 2 August 2016 at 4:56PM

I'm interested in the answer to this too...

posidom wrote: »

My situation is similar enough to ask a related question in this thread. I hope the OP doesn't mind as it may be helpful to them too.

What are the consequences of paying the debts in full or partial (with confirmation of final settlement in all cases)?
(a) all debts paid in full,
(b) some full, some partial
(c) all partial

I'm thinking in particular of credit score improvements, how soon will improvements kick in (eg. if full, is it 6 years after default clock started?), etc.

somuchindebt · 3 August 2016 at 1:31PM

Hi, please could you let me know if creditors ask where the money came from and if you have any more savings elsewhere?

sourcrates · 3 August 2016 at 1:42PM

bsclp118 wrote: »

I'm interested in the answer to this too...

somuchindebt wrote: »

Hi, please could you let me know if creditors ask where the money came from and if you have any more savings elsewhere?

If an account is already defaulted, the damage is done, you might as well settle for as little as possible.
Your credit file will recover with time, and by then it won't matter how an account was settled as it will of fallen off your file after 6 years.

It's not really a creditors buisness where the money has come from, but if they ask, a good response is to say a family member has offered it, and leave it at that.

Full and Final Settlement

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