How to make an offer of Full and Final Settlement to your creditors

  • John Baird -
  • 20th June 2017 -
  • 3 minutes to read

When you’re in a situation where debts are spiralling out of control and you want to prevent the situation worsening, one option is to make a ‘full and final settlement’ offer to your creditors.

This means that you have to use a lump sum of cash to repay a proportion of your debt, with the proportion offered being dependant on your previous history of repayments, as well as your current ability to repay.

Even though the offer will be a reduced amount, the creditor generally benefits by receiving a significant portion of their money, and no longer has to worry about chasing the debt.

How do full and final settlements work in practice?

Making an offer of full and final settlement can be a good option if you can’t foresee being able to repay your debt in full. You need access to a lump sum of cash, however, and it might be suitable if you’ve received one or more of the following:

  • redundancy pay
  • inheritance
  • a PPI payout
  • compensation for an accident
  • funds from the sale of an asset
  • you have family willing to lend or give you money
  • pension monies

It’s a good idea to let your creditor know where the lump sum will be coming from when you contact them, and to include a written record of your incomings and outgoings so they can see the value to them of accepting, particularly if they will otherwise have to wait a long time for full repayment.

How much to offer

As we mentioned earlier, a lump sum offer can be as beneficial for your creditor as it is for you. Chasing payment is a considerable burden, and if you have only repaid token amounts or missed a few repayments, the creditor is more likely to accept a lower offer.

If you’ve only missed a single payment they might still accept a full and final settlement, but it may need to be a higher proportion of the overall debt.

Full and final settlements are also known as ‘partial’ or ‘short’ settlements. The remaining debt is written off by your creditor, allowing you to start again financially without the burden of debt.

What are the main advantages of making a full and final settlement offer?

  • You’re able to move on from debt, and work towards a brighter financial future
  • Your creditor gains by receiving a cash lump sum, rather than waiting for an indeterminable length of time for repayment
  • Professional help is available to you when putting together an offer of full and final settlement

Will it affect your credit rating?

It’s important to retain any written documents regarding your settlement for a minimum of six years. This is in case, at some future point, you need to confirm that the debt has been repaid.

The debt should be removed from your credit file, and your account closed with the creditor once it has been paid, although the credit reference agencies may include a “P” next to the entry to show that partial settlement was made. This will still affect your ability to obtain credit for up to six years, as some of your debt had to be written off.

Scotland Debt Solutions can help you with your offer of full and final settlement, and will advise on whether it would be appropriate in your circumstances. We have vast experience of helping people with debt problems in Scotland, and will provide the professional guidance you need. Call one of the team for a same-day appointment to discuss your situation in complete confidence.

John Baird
John Baird

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