Full and Final Settlements

A Full and Final Settlement is often the best way to proceed if your creditors will agree as your debts will be paid off without any further deterioration to your credit rating.

A Full and Final OFFER is a process whereby you make a one off lump sum payment to your creditors, which is a lot less than you owe them, in return for the remainder of your debt being written off.

A Full and Final SETTLEMENT is when your creditors accepts your lump sum payment offer, which is often less than the full balance of a debt. In return, creditors will write off the remaining debt. So effectively this lump-sum will settle your outstanding debt.

You divide the lump sum over a number of different creditors, by making a pro-rata offer where the creditor that you owe the most to will receive the greatest amount and the smallest creditor in terms of debt value receives the smallest amount.

Why Would I Make a Full and Final Settlement Offer?

There are a number of circumstances where this type a Full and Final Settlement may be the best way to clear your debt. For example if you have friends or family that have offered the lump sum, you have savings, you have released equity from your property or if you have come into some money through an inheritance or windfall.

If you are thinking about a way to raise a lump-sum then it is important that you don't sell items that are essential or are needed for a reasonable standard of living. You don't want to sell your car if you need it for work purposes or sell tools that you need for your trade. But there may be ways that you can raise additional funds, by selling antiques or shares for example.

How Would I Make a Full and Final Settlement Offer?

There are a number of different techniques that Harrington Brooks can employ to achieve your settlement, which depends on your creditors, how long you have had the debts and whether you are in arrears.

Simple Settlement

You may have the opportunity to borrow from family or/and friends, who will only lend you the money if all your debts are written off.

Remortgage or/and IVA Settlement

(see Remortgages and IVA)

A more complicated variant is when we recommend a remortgage that will not pay off your debts but allows you to realise sufficient funds to make an offer to your creditors that is significantly less than the amount that you owe. This offer could be an agreed but informal arrangement (see Simple Settlement above) or a formal one off IVA payment.

The Psychology of Full & Final Settlement offers

The principle behind a Full & Final settlement is simple; that a creditor is more likely to accept a reduced offer to settle the outstanding debt if a cash offer is placed in front of them and they have the opportunity to accept it.

This principle is evidenced by Chris Tarrant on his TV programme, 'Who wants to be a millionaire?' as he waves a cheque in front of the contestant to increase the pressure and tension. You can imagine how difficult it is to ignore the cheque and ask for the next question!

So, the psychological principle is correct, but is it a practical solution to solving debt problem?

At Harrington Brooks we are sure that Full & Final Settlements will continue to grow in importance as more and more debtors are made aware of the solution.