If you have unsecured debts of at least £5,000 and have the ability to pay a lump sum to your creditors, perhaps through the sale of something of value, remortgaging your home or a donation from a friend or family, a full and final settlement could be the solution for you.

A full and final settlement involves offering to pay a proportion of what you owe to your creditors in one lump sum. In return, the creditors agree to write off the rest of the debt.

Benefits

  • A full and final settlement allows you to pay a lump sum that is less than the full balance you owe.
  • Negotiations with your creditors will be conducted on your behalf

Things you need to know

  • There is no guarantee the offer of a full and final settlement will be accepted by your creditors
  • Creditors will only accept a reduced payment where it is demonstrated that you can no longer keep up with your contractual payments and the amount offered to the creditors is the maximum possible amount
  • Any defaults or previous County Court Judgements will remain on your credit file for six years.

For more information on full and final settlements, read our questions and answers.

Questions & Answers

What is a full and final settlement?

A full and final settlement means you make one lump sum payment which is lower than the full balance of the debts which you owe to your unsecured creditors. In return for receiving the lump sum payment, your creditors agree to write off the rest of the debt.

What does a full and final settlement involve?

Each of your creditors will confirm the outstanding balance that you owe them. When confirmation of the balances are received, a Creditors Report will be prepared and sent to each of your creditors asking them to agree to the reduced payment proposal based on the lump sum available.

What is the full and final settlement process?

You instruct a provider to act on your behalf and hold the negotiations with your unsecured creditors.

You give to your provider full details including evidence of the lump sum amount that is to be offered to your unsecured creditors in full and final settlement.

The provider will obtain formal confirmation from each unsecured creditor of the outstanding debts.  Thereafter, a Creditors Report will be prepared and sent to each of your unsecured creditors asking them to agree to the reduced payment proposal based on the lump sum available.

Is there a guarantee my creditors will accept a full and final settlement?

As different creditors have different policies for negotiating settlement of debts, there is unfortunately no guarantee that all your creditors will accept your full and final settlement agreement.

If a creditor was to reject the offer, further negotiations can be held in an attempt to change their initial decision.

Why would my creditors accept a full and final settlement?

Your creditors could accept your offer of a full and final settlement for reasons which include:

  • They can avoid the legal expenses associated with taking you to Court which may not guarantee them a repayment; or
  • A lump sum payment may be more valuable to them than receiving smaller payments over a longer period of time.

Can I use a lump sum to pay off more than one creditor?

Yes, the lump sum payment is spread across your creditors on a pro-rata basis.

What happens to my credit rating if my offer is accepted?

Even though your full and final settlement offer is accepted by your creditors, any default notices or court action (e.g. County Court Judgements) taken out against you previously will still remain on your credit file for six years.

However, your creditors should mark the debt as ‘satisfied’ so that any other lender searching your credit file in the future will see that you have dealt with your debt successfully and no longer owe money to those creditors who received settlement.

Who will know about my full and final settlement?

Details of your full and final settlement remain private between you, your creditors and your full and final settlement provider. The full and final settlement is not made public. It is therefore up to you if you wish to make any other party aware of the full and final settlement.

When will I become debt-free?

If your creditors accept your full and final settlement offer, you become free from the debts included in the settlement once the lump sum payment has been made.

How do I contact you?

Take the first step to turning your debt around. By completing our online enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options.