What is a Full and Final Settlement?
A full and final settlement is when you offer a creditor a lump sum of money to clear your outstanding balance. This lump sum amount is usually less than the full amount you owe, but if your circumstances are unlikely to improve in the future and you are otherwise unlikely to be able to clear your balance, your creditors might be prepared to accept a lump sum payment in order to recoup at least some of the money they are owed. Once the lump sum payment has been received, the remaining amount will be cleared, and your account will be closed.
How does it work?
Final settlements are normally only accepted by creditors when they consider there is little prospect of achieving a great return through either a scheduled repayment plan or bankruptcy. Therefore, a final settlement is only appropriate if you have no assets and no income by which you can make monthly contributions to creditors.
You will have to put a settlement offer out to each of your creditors individually and wait for their response. However, it’s important to note that with a full and final settlement, lenders are under no obligation to accept any less than the full amount you owe – and if your offers are rejected, you may need to consider a more formal debt solution such as an individual voluntary arrangement.
Can I offer a Full and Final Settlement?
Many people find that full and final settlements are not applicable to their position. As such, there are other options available to individuals who are struggling with debt, such as IVAs or bankruptcy. However, if you believe you may be eligible for a full and final settlement, talk to us here.
What are the advantages of a Full and Final Settlement?
Although making a full and final settlement offer isn’t the right solution for everyone, there are several benefits such as:
- You potentially avoid Bankruptcy
- Creditors agree to write off part of your debt
- After settlement, creditors stop ringing and writing to you
What are the disadvantages of a Full and Final Settlement?
- Negotiations can take some time
- Creditors may continue legal action as there is no court protection (unlike an Individual Voluntary Arrangement)
- Payment normally has to be made within 14 days of acceptance
What to do next
If you are facing financial difficulty, are struggling to pay your debts and believe that a full and final settlement offer is the best way forward for you, it’s important to seek advice as soon as possible. The sooner you seek help, the more options you will have, so contact McAlister & Co today for expert help and advice surrounding your full and final settlement and how it all works.
Above all, remember that you don’t have to face financial difficulty alone. We don’t even need any personal details to answer initial questions on your situation, so call our friendly team today on 03300 563 600 for free confidential advice.