Making a final settlement offer for your debts

There are two types of final settlement:

• full
• partial

Full settlement

This is when you have enough money to pay your creditors in full.

The debts will be marked on your credit file as ‘satisfied’ or ‘settled’.

Partial settlement

This is when the amount you offer doesn’t cover all your debts but your creditors agree to write off the rest.

The debts will be marked on your credit file as ‘partially settled’.

It may be harder to take out more credit while you have a ‘partially settled’ marker on your report.

The debts will stay on your credit file for six years from the date of default or settlement, whichever happened first. Generally, people default on their debts before they agree a settlement.

It depends. Creditors are more likely to accept a partial settlement offer if you can’t repay the full debt in a reasonable amount of time.

Creditors will expect you to offer as much as you can afford.

If you want to make a partial settlement offer:

Work out what to offer each creditor

You should offer a fair amount to each creditor e.g. if your lump sum is 80% of your total debt, you should offer each creditor 80% of what you owe them.

Make an offer in writing

And ask your creditors for written confirmation that they accept your offer. Don’t send any money until you have that confirmation and keep any correspondence relating to the settlement offer for your records.

Be prepared to negotiate

Some or all of your creditors may reject your offer. Be prepared to talk to them individually to see if you can come to an agreement. If possible, you could increase your offer.

If you can’t afford a higher offer, explain your situation and provide proof of your current circumstances. It may be useful to share a copy of your budget.

Pay your creditors

Once a settlement has been agreed, make the payments as promised and keep proof of those payments.