My Full and Final Settlement Offer Has Been Rejected
Do not despair, a full and final settlement can be a rather slow process. In many cases a creditor or a debt collection agency (DCA) may want to hold out for as much money as possible. Here are some things to consider when offering a full and final settlement:
- Who is the Debt With.
- Your Income and Expenditure.
- Do You Own a Property.
- How Dirty is the debt.
- Your Credit Rating.
- Have other creditors agreed.
Lets look in more detail as to why your offer of a full and final settlement may have been rejected:
Who is the Debt With
If your debt is still with the original lender, they may not be willing or able to negotiate a full and final settlement. However, if they have passed the debt onto an in-house debt collection team or an outside debt collection agency (DCA), your chances of reaching a settlement are slightly higher. This is because DCAs are often authorised to negotiate and accept settlements on behalf of the lender. It’s important to note that settling the debt with a DCA may still have a negative impact on your credit score, so it’s always a good idea to seek professional financial advice before making any decisions.
Your Income and Expenditure
Your income and expenditure (I&E) should accurately reflect your financial situation. If, after completing your I&E, you have disposable income, creditors may prefer lower monthly payments rather than accepting a full and final or short settlement. However, it’s important to be honest in your I&E, as creditors will view any excessive spending on holidays, birthdays, or Christmas as an unnecessary expense. It’s important to prioritise your debt payments over luxury expenses in order to resolve your financial situation.
Do You Own a Property
Owning a property can complicate the process of negotiating a full and final settlement for outstanding debt. This is because the lender may seek to secure the debt against your property using a charging order. A charging order grants the lender a legal interest in the equity of the property, which can prevent the sale of the property without first repaying the outstanding debt. Therefore, the existence of equity in the property could be seen as a potential asset that the lender could pursue to recover the outstanding amount owed, which could hinder the chances of reaching a full and final settlement. However, it’s worth noting that not all lenders will seek to secure the debt in this way, it will cost them money to go through the process of doing this.
The Age of a Debt
As a debt ages (or the “dirtier” a debt is), the chances of you reaching a favourable full and final settlement will increase. This is because as debts get older, they become less valuable and more difficult to collect. Therefore, lenders may be more willing to accept a lower settlement amount in order to recover some of the outstanding debt. Additionally, the older a debt becomes, the more likely it is that the lender has sold it on to a debt collection agency for a fraction of its original value. These debt collection agencies often buy debt in bulk and may be more open to negotiating a full and final settlement due to the low cost of acquisition.
Have Other Creditors Agreed to Settle
If you have successfully negotiated a full and final settlement with one or more of your creditors, it’s worth highlighting this fact when negotiating with other creditors, as it may encourage them to follow suit. Creditors are often willing to consider settlement offers if they can see that other creditors have already agreed to settle, as this reduces their risk of not receiving payment. Getting the first creditor to agree is the hardest part.
Your Credit Score
Creditors often rely on credit scores to evaluate the financial situation of debtors and determine whether your reported financial difficulties match your credit history. If your credit score is consistent with the claimed dire situation, the creditor may be more willing to negotiate a full and final settlement. However, if the credit score is inconsistent with the your claimed financial difficulties, the creditor may be less sympathetic to your situation and more likely to pursue legal action to recover the outstanding debt. Therefore, it’s important for you to be honest about your financial situation and provide accurate information when negotiating with creditors.
Will a Full and Final Settlement Affect My Credit Rating?
Opting for a full and final settlement can negatively impact your credit score, as creditors may view you as a higher risk borrower. However, having a settlement in place is generally better than having an outstanding debt, and over time the impact on your credit score may lessen.
When negotiating a full and final settlement, it’s important to take into account all the factors listed above It’s also important to keep in mind that the process of reaching a settlement can be slow, as it may involve multiple rounds of negotiation (stick to your offer). However, while the process may be slow, it’s important to remain patient and persistent, as reaching a full and final settlement can help to alleviate the burden of outstanding debt and provide a fresh start for you.
If you are still reading at this point, you may be interested in this post on Full and Final Settlements Achieved.