What is a Full & Final Settlement Offer?

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When it’s time to call it quits?

If you’ve kept your creditor(s) waiting a while for their funds, or your small monthly payments are not enough, an FSO could be the way to go. It simply means that you must pay most of the debt now. You may at this stage consider offering your creditors a ‘lump sum’ – if you have enough for one.

You may have just come into a windfall and decide to use this money as your lump sum. And if your creditors(s) want this matter dealt with quickly, they may agree to settle for a lump sum, where the outstanding debt is legally written off. End of story.

Or maybe not

Unfortunately, not all creditor(s) are as understanding – it all depends on the percentage of the outstanding debt you owe. Plausibly there are few creditors who’d be happy to accept 40% and write the rest off. In this case the creditor(s) may ask you to use your ‘lump sum’ money to apply for an IVA in England, Wales or Northern Ireland, or a PROTECTED TRUST DEED IN SCOTLAND. This too, is entirely legal.

But if you couldn’t pay before, how can you pay now?

  • The debt owed may have begun months, even years ago – could you increase your monthly instalments so that everyone is happy?
  • You may have had a pay rise since the debt began?
  • Have you been seen the Citizens Advice Bureau? They’re always on top of matters like these – maybe there’ll find some kind of benefit you’ve overlooked or not known about. There may even be something new that you qualify for now but not before.
  • Can friends/family help? – Now that they know you’re at this stage.
  • You may have to start selling assets – leaving your home and car until last.
  • Buy a smaller car.
  • Over 55? You can start withdrawing your pension.
  • Make a PPI claim.
  • Like we said there may have been a windfall or recent inheritance.
  • File for bankruptcy or sequestration as a very last resort.

Remember, you don’t need to all of your creditors the same amount. Just because one has demanded a final payment doesn’t mean they all do.

How will an FSO affect your credit score?

OK, so the last thing you want is a flag or black mark against your credit. We all know this can have a negative affect on buying property, hire purchase and just about everything else where cash comes in. If you agree to a full and final settlement, your creditor will mark the debt as ‘partially settled’ on your credit file.

This will inform any future creditor(s) that the debt you owed was cleared for less than the original amount. This could affect their decision about whether to lend to you. This is important, especially if you’re looking to invest in property a few years down the line – though your flag will be lifted from your account six years after it was partially settled. So you’re clean again.

Of course, this is not a decision you make overnight. There’s a lot to think about. And Find a Debt Expert are always on hand for free, impartial advice. You may have gone too far down the FSO track when there are actually a few repayment plans that are better suited to your current position. Let Find a Debt Expert find what works for you. Get in touch today. 

Find a Debt Expert s a trading style of Milton & Stirling Ltd, Company Number SC587851 – Solutions Scotland, 78a Stanley Street, Glasgow, G41 1JH. DPA number ZA431921

Milton & Stirling Ltd are an Appointed Representative of MichaelAlan Ltd who are authorised & regulated by the Financial Conduct Authority, FRN 690939.

As part of our free service, we’ll review your financial situation, explain the available options and recommend a debt solution which is suitable for you. The risks of all suitable solutions will be explained clearly and if you decide to go ahead with a debt solution we will refer you to one of our trusted providers who specialise in the management of that debt solution. We’ll be paid for introducing you or for the preparatory work we do, depending on your debt solution fees may be payable if ongoing services are provided. Read about fees and key information in our terms & conditions. To find out more about managing your money and getting free debt advice, visit Money Advice Service , an independent service set up to help people manage their money.