Summary: This article explains under what a final settlement offer is and under what circumstances it may be applied.
With more people getting into debt just to make ends meet, it is logical that those struggling to repay debt will also increase. There is masses of help and advice available, as well as a number of debt solutions such as Individual Voluntary Arrangements (IVAs) and Debt Management Plans (DMPs). However, such solutions may not be appropriate for some individuals, and indeed some may prefer to deal with debt in their own way to avoid any issues with credit ratings and so on.
Should an individual receive a lump sum of money, such as an inheritance, a lottery win or from the sale of a property or assets, it is always advisable to use the money to reduce debt. Depending on the amount received, it could clear all debt owed, though in some cases it may only partially repay the outstanding amount. Where it is less than the outstanding amount, it may be possible to make an offer to all the creditors to make an offer to repay some of the debt as a full and final settlement, whereby if it is accepted, any outstanding debt is cleared and the payment is considered full repayment.
How to make a final settlement offer
The first thing to establish is how much the offer should be to the creditor(s). One thing is sure and that is that they will be looking to recoup as much of the outstanding debt as possible, so it is important to be realistic. If there are multiple creditors, and one or more refuse the offer, it may be possible to renegotiate. It is also possible that none will accept the offer. It is also vital to have the creditors acceptance in writing BEFORE sending any money.
My creditors have refused my final settlement offer, what should I do?
If an offer is refused, and the creditors are not prepared to negotiate, it is still advisable to use the lump sum to repay as much of the debt as possible, starting with the most expensive debt (i.e. that with the highest rate of interest). If after clearing some of the debt, the individual still finds themselves struggling on a monthly basis, it is important to seek advice from a licensed money advisor or for one of the free advice services available, such as Step Change, National Debtline or the Citizens Advice Bureau (CAB).