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  • FIRST POST
    Mattb2010
    Help - full and final settlements.
    • #1
    • 7th Oct 10, 12:01 PM
    Help - full and final settlements. 7th Oct 10 at 12:01 PM
    Hi

    I have been looking at this forum for a while and found it really useful so finally decided to ask a question.

    I currently have several loans and credit cards that up until now I have managed to pay (only min payments though). However this is through robbing Peter to pay Paul. Due to my my good credit file (at the moment) I can remortgage my property and release some equity. However due to my income I can only raise 65% of my property value which is not enough to clear my debts in full. Therefore I was wondering could I offer my creditors a reduced full and final settlement figure? Would they accept lower figures even if I have equity in my house still?

    Any advice would be greatly appreciated.

    Thanks

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    Last edited by Former MSE Wendy; 12-10-2010 at 9:45 PM.
Page 1
    • ITtim
    • By ITtim 7th Oct 10, 12:02 PM
    • 404 Posts
    • 71 Thanks
    ITtim
    • #2
    • 7th Oct 10, 12:02 PM
    • #2
    • 7th Oct 10, 12:02 PM
    You would have to ensure they marked it as settled in full, otherwise it will show on your credit report.
    kicking squealing gucci little piggy.
    • king100
    • By king100 7th Oct 10, 12:03 PM
    • 1,520 Posts
    • 910 Thanks
    king100
    • #3
    • 7th Oct 10, 12:03 PM
    • #3
    • 7th Oct 10, 12:03 PM
    Hi

    I have been looking at this forum for a while and found it really useful so finally decided to ask a question.

    I currently have several loans and credit cards that up until now I have managed to pay (only min payments though). However this is through robbing Peter to pay Paul. Due to my my good credit file (at the moment) I can remortgage my property and release some equity. However due to my income I can only raise 65% of my property value which is not enough to clear my debts in full. Therefore I was wondering could I offer my creditors a reduced full and final settlement figure? Would they accept lower figures even if I have equity in my house still?

    Any advice would be greatly appreciated.

    Thanks
    Originally posted by Mattb2010
    Do you know if your loans or credit cards have a valid CCA.

    Please read below.

    IS MY AGREEMENT ENFORCEABLE( Via section 127(3) CCA1974)
    PRESCRIBED TERMS FOR THE PURPOSES OF SECTIONS 61(1)(0) AND 127(3) OF THE
    CONSUMER CREDIT ACT 1974 Taken from sced.6(1983/1553) regulations
    (If you just want to find out, skip the bits in between the stars it’s just some extra information)

    **What do we mean by unenforceable?
    In the Consumer Credit Act section 127 there is a provision for making an agreement unenforceable if it does not contain certain pieces of information.
    Subsections 1,2,3,4 state which pieces of information these are, and everything mentioned there must be included within the body of the agreement, if one is missing the agreement is unenforceable.

    How does unenforceable differ from enforceable with a court order only?
    When an agreement is unenforceable it means that the court or the judge cannot make a ruling on it. The court cannot make it enforceable.
    When an agreement is enforceable only by ruling of the court it means that the agreement can be stopped by the debtor but the court has the power to re-instate it and allow the credit to continue to enforce.**

    The Pescribed Terms are these

    A Amount of credit
    A term stating the amount of credit

    B Repayments
    A term stating how the debtor is to discharge his obligations under the agreement to make the repayments, which may be expressed by reference to a combination of any of the following-
    (a) Number of repayments;
    (b) Amount of repayments;
    (c) Frequency and timing of repayments;
    (d) Dates of repayments;
    (e) The manner in which any of the above may be determined; or in any other way, and any power of the creditor to vary what is payable.

    C Rate of interest
    A term stating the rate of interest to be applied to the credit issued under the agreement
    D Credit limit
    This may be a term or the manner in which it will be determined or that there is no credit limit.
    --------------------------

    Which of these applies to you depends on the type of agreement you have?

    For a Running Account (credit card) agreement

    BC and D Apply





    For a Restricted Use Debtor Creditor Supplier
    • Where the dealer is the supplier and the creditor is the one providing the finance. The money can only be used for the purpose it is given. There is no interest on the purchase (the cash price is the same as the total price)
    • And there is no advance payment
    A is applicable

    For a fixed Sum Credit Agreement
    A conventional credit agreement with none of the above restrictions

    A and B apply

    For a Hire Agreement

    B is Applicable

    This paper only covers section 127(3) of the Act agreements can also be unenforceable by contravention of sections 1 and4 this will be the subject of the next paper.
    Please note that these Prescribed terms where not changed in any way by the 2004/1482 Ammendments although the form in which they appear on the agreement was. Subsection127(3) was repealed on the 6th of April 2007 so that unenforceability due to 127(3) will only apply to agreemens executed before that date.
    Last edited by king100; 07-10-2010 at 12:14 PM.
    I all have learnt is from others on many sites.
    Seek legal help if unsure.
    Dont pay Private Parking tickets - they are mere invoices.

    PRESS THANKS-------------}
    • Tixy
    • By Tixy 7th Oct 10, 12:07 PM
    • 31,062 Posts
    • 39,469 Thanks
    Tixy
    • #4
    • 7th Oct 10, 12:07 PM
    • #4
    • 7th Oct 10, 12:07 PM
    If you have been paying all your payments on time so far they are very unlikely to accept reduced F&F settlements. The reason being is that they can just continue as things are and will get the full payment.

    Reduced settlements of any size are only given after a person has defaulted and the creditor thinks there is quite a high chance they won't get full payment or that it will take many many years to get payment in full.

    Only real exceptions to this are if you owe money to a company who are really struggling financially, welcome finance being a good example.

    Before you decide to turn unsecured debt into debt secured on your property think very carefully about the additional risk to the roof over your head. If you lost your income (eg lost your job or through ill health) then you would stand a greater risk of losing your house.
    Might be worth reading this before you make a decision http://www.moneysavingexpert.com/loans/secured-loans much of the reasoning in it or against them applies to increasing your mortgage as well.

    Also if you are moving debts that are short term at high aprs to longer term at a lower apr you might still find that you pay far more in interest overall. Worth doing some comparison calculations before you make any decision (the snowball calc at whatsthecost.com is quite useful for this).
    Last edited by Tixy; 07-10-2010 at 12:12 PM. Reason: addl info
    A smile enriches those who receive without making poorer those who give

    or "It costs nowt to be nice"
    • Tixy
    • By Tixy 7th Oct 10, 12:10 PM
    • 31,062 Posts
    • 39,469 Thanks
    Tixy
    • #5
    • 7th Oct 10, 12:10 PM
    • #5
    • 7th Oct 10, 12:10 PM
    Do you know if your loans or credit cards have a valid CCA.
    Originally posted by king100
    If you consider looking into this option and did decide to stop paying on the basis on an unenforceable agreement remember that your credit rating would be severely affected (with defaults etc) which would make getting new credit and mortgages much more difficult for the next 6 years. Its only appropriate to consider if you don't mind your credit file being wrecked.
    A smile enriches those who receive without making poorer those who give

    or "It costs nowt to be nice"
  • GeorgeUK
    • #6
    • 7th Oct 10, 12:10 PM
    • #6
    • 7th Oct 10, 12:10 PM
    If you have not defaulted on your accounts, the most you are likely to achieve is 95%. If you are paying the minimum payments then there is no reason for them to take a reduced settlement offer.

    I'm also not sure how this may affect your credit file. As ITtim says, these settlements may be reflected as partially settled on your file which can impact your credit rating.

    Have you looked at other options of reducing the debt? 0% credit cards? reclaiming missold PPI and creditcard charges?

    If you are struggling right now, it may be better to post up a statement of affairs so we can see if there are any areas where you may be able to make savings. I don't think a settlement would be accepted in your case right now.
    www.makesenseofcards.com/soacalc.html Try to make it as accurate as possible rather than what you think you are spending or should be spending.
    After falling off the gambling wagon (twice): 33,600 (24,000+ 9,600) - Original CC Debt: 7,885.91

    Dad Gift 6k Savings & Inv Tst: 2,500
    Loan 10k: 0 Dad 5.5k: 2,270 LTSB: 0 RBS: 0 Virgin 0 Egg 0

    Total Owed: 2,270 (+6k) 11/08/2011
  • Mattb2010
    • #7
    • 7th Oct 10, 12:18 PM
    • #7
    • 7th Oct 10, 12:18 PM
    Thanks for the replies

    I did think it may be difficult for me to get them to accept f and f due to no missed payments. However my thinking is that I literally at my limits with my credit cards and only making min payments. If I don't get this remortgage and the lenders accept f and f I think I will only be a month or two away from either having to enter into a debt management or IVA.....if I could prove to my creditors that this is the route I am heading unless I can make F&F do you think I have more joy as with an debt management/IVA I believe they would get potentially a lot less.

    thanks
    • Tixy
    • By Tixy 7th Oct 10, 12:25 PM
    • 31,062 Posts
    • 39,469 Thanks
    Tixy
    • #8
    • 7th Oct 10, 12:25 PM
    • #8
    • 7th Oct 10, 12:25 PM
    Hi

    Its difficult to advise how your creditors would view this without seeing your full financial positon and whether they would accept that you needed to be in a DMP/IVA and could not afford the current repayments.
    As George suggests it would help if you could post a statement of affairs using the link he gave. This would help us see whether there are any other ways you could reduce your outgoings or what options might be suitable and whether a DMP would be accepted.
    A smile enriches those who receive without making poorer those who give

    or "It costs nowt to be nice"
  • Mattb2010
    • #9
    • 7th Oct 10, 12:36 PM
    • #9
    • 7th Oct 10, 12:36 PM
    Hi

    Its difficult to advise how your creditors would view this without seeing your full financial positon and whether they would accept that you needed to be in a DMP/IVA and could not afford the current repayments.
    As George suggests it would help if you could post a statement of affairs using the link he gave. This would help us see whether there are any other ways you could reduce your outgoings or what options might be suitable and whether a DMP would be accepted.
    Originally posted by Tixy

    Thanks is their a std template I could use to show my current financial position
    • Tixy
    • By Tixy 7th Oct 10, 12:47 PM
    • 31,062 Posts
    • 39,469 Thanks
    Tixy
    We use this form http://www.makesenseofcards.com/soacalc.html which has instructions for posting up onto MSE.
    A smile enriches those who receive without making poorer those who give

    or "It costs nowt to be nice"
  • GeorgeUK
    Use the SOA calculator i posted
    www.makesenseofcards.com/soacalc.html

    If you fill this in and format it for MSE, you should be able to copy and paste the results into a post here.
    After falling off the gambling wagon (twice): 33,600 (24,000+ 9,600) - Original CC Debt: 7,885.91

    Dad Gift 6k Savings & Inv Tst: 2,500
    Loan 10k: 0 Dad 5.5k: 2,270 LTSB: 0 RBS: 0 Virgin 0 Egg 0

    Total Owed: 2,270 (+6k) 11/08/2011
    • fatbelly
    • By fatbelly 13th Oct 10, 12:42 PM
    • 12,979 Posts
    • 10,048 Thanks
    fatbelly
    So this is 'debt-free wannabee chat of the week'?!

    There is an important principle here that it is dangerous to convert unsecured debt to secured (Tixy has mentioned this).

    Not only does it increase your monthly payments to your priority creditors (those who can actually do something, rather than just make threats), it also means that, if you ever need help from the dwp's 'support for mortgage interest' they will not pay the full amount of the mortgage - just the amount you originally borrowed to buy the place.

    If the op posts a SoA then we can all have a better look at this situation...
  • natalie262
    There is a gret way to avoid all issues you are currently facing although it is a long term strategy- pay 1 or 2 of your most expensive in terms of interest cards off in full using a little money raised via re-mortgage but not overcommitting yourself. Then use the power of the compund interest in the credit cards to your advantage. Take the 2 min payments that you were paying to the now repaid cards and pay that amount plus the minimum to the next expensive card. In this way you will now find that for no or very little extra cash to you per month you will pay off the 3rd card in a fraction of the time that you were looking at, and if you keep applying the principle to each card at a time you will see massive improvements in your ability to get out of trouble and start pro-actively managing things to your own advantage. The other upside is the huge savings in terms of interest payments over X number of years in your favour by applying this method.

    This is a long term strategy not a quick fix, but shows how to see a light at the end of the tunnel if payments are robbing you of any spare cash each and every month and there seems no way out.

    For those in not such dire circumstances the same can be applied - using just an extra 50 per month to your min payment (approx (100) on a 5000 debt pays it off in just over 6 years instead of 40+! Apply the 150 you then have per month to the next card owing 5000 and it will be paid off in another 3 years (again saving 36 years of interest ....!) - now take your 250 etc etc and so on an so forth. Powerful stuff indeed.
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