Author Topic: Final settlement advice  (Read 5927 times)

David M

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Final settlement advice
« on: Jan 24, 2012, 01:26:15 PM »
We have had some unsecured debt of £40K with one creditor for just over a year now (2 loans + 2 overdrafts) and have been paying an agreed amount of £5 a month on each debt for this period.
In a bid to get our credit files back in order, we decided to write a full and final settlement letter 3 weeks ago. We offered 10%.
I received a call yesterday saying they would accept this ,but it would show our debts as being partially cleared on our files (would remain there for 6 years + 1 day).They would also cease chasing us for the remainder of our debt.
To have our debts as satisfied in full on our files, they gave us another offer of 12K.
I have both of these in writing, with a fortnight to think them over.
Any advice would be welcome ...

James Falla

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Re: Final settlement advice
« Reply #1 on: Jan 25, 2012, 02:46:00 PM »
Hello David M
 
I would say that trying to settle a debt with a lump sum of 10% is stretching it a bit and I would be surprised if any creditor would accept that. In my experience you should be able to settle at 50% of the outstanding debt and so anything below that mark is a bonus. If they have offered to settle on £12k (30%) I think this is a very good deal and would be mindful to seriously consider it. What are your wider circumstances? Are you a homeowner with equity in the property? If not then you might be able to get a better deal by proposing a settlement under the umbrella of a full and final IVA. In that case you might be able to settle on say £8k. However as I say it would very much depend on your wider financial circumstances.
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David M

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Re: Final settlement advice
« Reply #2 on: Feb 01, 2012, 07:50:31 PM »
Thanks for your reply.  We are home owners with around £60k equity in the property.  We have one wage of £28k pa and one person not currently working.  Our outgoings exceed our incomings which is how we came up with the £5 per debt figure.
If we decide not to settle, how long are they likely to be happy with such a minimal payment?  If the other person gets a job, can they demand more money?
We have received written confirmation of their offer, but it states that the £12k settlement they will partially satisfy the defaults registered against us (which was not what she said on the phone) what does this mean?
We are speaking to our creditors again on Tuesday to discuss our options.  We are considering selling the house if we could negotiate our credit files to be fully satisfied.  Is this likely? Or if we decide to do nothing, would anything happen? Any advice would be greatly received.

James Falla

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Re: Final settlement advice
« Reply #3 on: Feb 02, 2012, 07:10:34 PM »
Hi there David M
 
If you decide not to settle and continue making your token payments, it is very difficult to say how long your creditors will continue to quietly accept this arrangement. In my experience they are likely to want to review the situation every 6-12 months.
 
If the other party gets a job and you are still making token payments, it will then be up to you to review your circumstances and decide whether you want to offer more each month. Your creditors cannot force to to do this. However it would of course be in your interests to pay more each month and thus pay your debt faster.
 
The letter you have been sent is annoying given that this is not what you were told on the phone. By marking the debts as "partly satisfied" this still means that your credit rating will still be negatively affected and your ability to borrow in the future will be reduced. However this may not be of particular concern to you. I would say however that you should not agree any settlement deal unless you are happy that it will mean that the bank can no longer chase you for any outstanding balance and you should get this in writing.
 
Why are you concerned about the negative impact on your credit files? Do you intend to borrow more in the next 6 years? If not I am not sure that selling your house to pay your debts would be a sensible option when you know an alternative settlement deal can be reached.
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Simon Wyllie

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Re: Final settlement advice
« Reply #4 on: Feb 14, 2012, 06:37:47 PM »
Hello David M.
 
Are we talking about your debts being partly-satisfied, or default notices on your credit file being marked partly-satisfied?
 
These could be two entirely different things.
 
If you have written confirmation that your debts will be satisfied (and no longer chased) in return for a payment of 10% of what is due this seems like a fantastic deal.
 
Marking a default notice as being partly-satisfied in such circumstances would not be unusual. Some creditors already do this after they have written off part of a debt at the end of an IVA or Scottish Trust Deed. It serves as a warning to other creditors that you did not repay the original debt in full, but it doesn't mean that you still owe the money or will be chased for it. 
 
James asks an important question in terms of your inclination to access credit. If your outgoings currently exceed your income using more credit could be very dangerous.

simonmisiewicz

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Re: Final settlement advice
« Reply #5 on: Apr 23, 2012, 03:55:05 PM »
When would you like all your debts paid off?


Have the end in mind.


Can you achieve your strategy with the current way of doing things?


What about your property would you sell the property to pay off the debts and move into rented accommodation?


I wish you the very best of luck


Simon








James Falla

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Re: Final settlement advice
« Reply #6 on: Apr 25, 2012, 05:27:16 PM »
David M did mention that he would consider selling his house in order to settle the debts owed Simon. However the real problem is agreeing the amount that the creditors will settle on. At the end of the day if you are negotiating to settle debt with a lump sum full and final payment, you need to get the offer you have agreed with the bank in writing. Until this happens no money should change hands.
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simonmisiewicz

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Re: Final settlement advice
« Reply #7 on: Apr 30, 2012, 01:58:35 PM »
I quite agree. Both sides need to be transparent and both sides need to know what is involved in the process.

Joe Sanders

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Re: Final settlement advice
« Reply #8 on: Jun 20, 2012, 07:23:20 PM »
Agree with James, a Full & Final under an IVA is always a good option for a smaller % offer

James Falla

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Re: Final settlement advice
« Reply #9 on: Jun 22, 2012, 10:44:46 AM »
The problem with the IVA full and final option in this situation Joe is that when I suggested it, I was not aware of the equity in David M's property. The full and final IVA would work very well for them if they had no equity or were renting. However as this is not the case the full and final IVA option is probably not available and the option of coming to an informal settlement offer seems the best way forward.
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