How to Achieve a Substantial Full and Final Settlement
There are a number of things that you need to consider when trying to achieve a large discount in a Full and Final Settlement. In simple terms, the dirtier a debt is and your lack of assets, will often produce a really good low settlement figure.
- Available funds
- Do you have any assets
- Age of the debt
- Has the debt been sold on
- Lack of income to pay monthly
- Credit Report
Available Funds for a Full and Final Settlement
Having the funds readily available for a full and final settlement is of course a necessary. It should be stressed that if there are funds available for a full and final settlement, it is best if these funds are held by a “third party or family friend”, this is all a creditor needs to be told! Firstly, this adds another layer of evidence that the third party can verify that those funds were for the sole purpose of being used for the full and final settlement. Secondly, if you are holding the funds in your account, a creditor could apply for a third-party debt order, previously known as a garnishee order. A garnishee order or third party debt order is a legal order that allows a creditor to collect money owed to them by deducting it from the debtors bank account, or by requiring a third party who owes money to the debtor to pay the creditor instead.
Property and Full and Final Settlement
If you have any assets or own a property that has any equity, then a creditor is less likely to want to agree a full and final settlement.Owning a property with equity can potentially reduce the likelihood of obtaining a substantial full and final settlement when dealing with a creditor. This is due to the fact that the equity in the property can be viewed as a potential source of funds to pay off outstanding debts, and therefore may be subject to seizure or liquidation in order to satisfy the creditor’s demands.If however, you have very little or negative equity in your property, this will work in your favour. Your property is at risk!
Age of a Debt Can Help Achieve a Good Full and Final Settlement
The older a debt is and the more that the debt has been sold on to other debt collection agencies, means that you can achieve a better full and final settlement. Remember, when aged debts are sold on, the new owner of that debt will have only paid pennies in the pound for that debt. Therefore in most cases, a low offer of a full and final settlement, will often result in the company accepting your offer, as they are still making a profit. It will still be a fight to get a low settlement, but it can be achieved. If on the other hand your debt is still with the original lender, then achieving a good full and final settlement is less likely.
Showing a Lack of Income to Pay Monthly
In order to achieve a substantial full and final settlement, you will also need to show that you are earning insufficient funds to make reasonable monthly payments towards your debts. It is not unusual for a creditor to prefer to receive £5 per month over a longer term, than accept a full and final settlement. However, if your financial situation has changed due to ill health, a drop in income etc, then this could also be used as evidence to show that you are no longer able to pay a decent amount towards your debt.
Full and Final Settlement and Your Credit Report
Remember, your credit report provides a detailed snapshot of your financial situation and can be a valuable tool that a creditor will use assessing your overall creditworthiness or ability to pay. So if your credit report does not reflect your inability to pay your creditors, then they are also less likely to accept a low figure as a full and final settlement.
Will a Full and Final Settlement Affect My Credit Rating
A full and final settlement can potentially have an impact on your credit rating, depending on a variety of factors such as the specific terms of the settlement, the length of time it takes to reach an agreement, and the overall state of your credit history. In general, settling a debt for less than the full amount owed can be viewed negatively by lenders and credit bureaus, as it may suggest that you have struggled to manage your debts effectively in the past. However, the exact impact on your credit score will depend on a range of other factors, such as your payment history, credit utilization ratio, and overall debt-to-income ratio. It is important to carefully consider the potential impact of a full and final settlement on your credit rating, and to seek professional advice and guidance as needed in order to minimize any negative consequences and maximize your long-term financial stability.
From a creditors point of view, the more dire your financial situation looks to them, the more likely you will be able to achieve a good full and final settlement. However, at the very start of the process, there is no harm in asking a creditor what they would be willing to accept as a full and final settlement. There are times when even a creditor needs to generate some additional income! For more Full and Final Settlement Success Stories.