How to Achieve Full and Final Settlements on Your Debts
- Assess your financial situation: Before approaching your creditors for a settlement, you need to assess your financial situation. Make a list of all your debts and calculate how much you can realistically afford to pay as a settlement. The Full and Final Settlement Calculator will show how much to pay each creditor on a pro-rata split.
- Any funds you have available should be held by a third party or family friend. If you are holding the funds, then a creditor could apply for a TPDO (Garnishee Order). Also, when it comes to payment, you will have another layer of evidence.
- Negotiate with your creditors: Once you know how much you can afford to pay, you should negotiate with your creditors. Explain your situation and offer to pay a lump sum amount as a settlement in exchange for having the remaining debt written off. Do not go above the limit set by the pro-rata split on your spreadsheet. Always negotiate with creditors in writing, this way you have a paper-trail of evidence.
- Get everything in writing: Once you have agreed on a settlement amount, make sure you get everything in writing. This should include the amount of the settlement, the payment terms, and a confirmation that the remaining debt will be written off.
- Make the payment: Once you have agreed on the settlement terms, make the payment as soon as possible. You may be able to negotiate a payment plan if you cannot make the full payment upfront.
- Check your credit report: After making the payment, make sure you check your credit report to ensure that your creditor has updated your account as settled paid in full, partial settlement or short settlement.
- Keep a record: It’s important to keep a record of the settlement agreement and payment made, including copies of any correspondence with your creditors. This will help you in case of any future disputes or issues.
- Seek professional advice: If you are struggling with debt, it’s important to seek professional advice from a debt counsellor or financial advisor. They can help you manage your debt and negotiate with your creditors on your behalf. However, you should be advised that they will charge a fee, which is about 20% of the amount saved!
Remember, it’s always best to pay off your debts in full and on time to avoid any negative impact on your credit score. However, if you are unable to pay your debts in full, a settlement may be a good option for you.
Full and Final Settlements and Owning a Property Issue
If you own a property with equity, it could potentially cause a full and final settlement to fail. This is because creditors may see that you have assets that could be used to pay off the debt in full, and they may be less willing to accept a settlement.
If you do own a property with equity, it’s important to be upfront with your creditors about this. You may need to offer a larger settlement amount to convince them to accept the settlement, or you may need to explore other options such as selling the property to pay off the debt in full.
Example of Full and Final Settlements
If you are looking for some examples of full and final settlements that have been achieved with creditors, then maybe take a peak at this post; Short Settlements Achieved where you will find links to other full and final settlements.