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Full and Final Settlement

Description

A Full and Final Settlement Offer is where you ask your creditors to let you pay a lump sum which is less than the full balance you owe on the debt. In return for having a lump sum payment the creditor agrees to write off the rest of the debts.

It is important that you explain to the creditors that the money will not be available forever and that you will not make the payment unless the offer is accepted.

You may have a lump sum that you need to divide up amongst several creditors. The main way of dividing the sum is to make pro-rata offers. The creditors you owe the most to will receive the majority of the sum and small amounts are paid to the remaining creditors you have.

Eligibility

You may be able to do this if you have come into some money, have some savings you can use, a friend or relative has offered to put a lump sum forward or you have released equity from your property.

Advantages

  1. Once agreed your creditors should change your credit reference file details to show the balance is satisfied and the date.
  2. Allows you to negotiate a reduction in the amount of debt owing to your creditors.

Disadvantages

  1. If your creditors do not accept your full and final settlement in writing and you make a payment, they can come back to you years later for further payments.
  2. Your creditors must agree to your proposed arrangement.