What are the implications of using a partial settlement to clear a debt?

Question

I wrote to all our creditors recently to offer a full and final settlement figure for our debts. Most turned the offers down, but one accepted and one offered to consider us for a partial settlement. I would like to clear some of these debts, but I don't really understand the difference between the two options and I'm worried about the implications for our credit in the future. Should I just ignore the partial settlement offer or is it worth considering?

Answer 1

Depending on your circumstances you have a number of options-

Remortgage (obviously only if you are a homeowner with avaliable equity)

Informal Arrangement
(as you are currently attempting)

IVA
(if your unsecured debt problems total over £15,000 and you can afford at lest £150/month for the next 5 years)

Bankruptcy
(if you honestly believe that there is no way that you will be able to pay your debts off and live)

All of the above apart from the first will have a negative effect on your credit rating and the last two will pretty much rule you out of getting any credit in the next 6 years.

If you want any more help yu would be best speaking to a Debt Management Company, most of which offer a free initial consultation. After this you are under no obligation to use their services.

http://www.morrisonclarke.co.uk

http://www.debt-line.org.uk

Answer 2

I would consider the option of an IVA if you have numerous debts. A full settlement is obvious, the debt is closed. With a partial settlement you still owe money. If you have numerous debts it's likely that your credit rating has been affected and when it comes down to it, your credit rating isn't as important as getting rid of the debts. With an IVA, if its agreed the creditors can make no contact to you in any way and can take no action against you as long as you make payments. Additionally if you offer to make a settlement payment it is more likely to be accepted.

Answer 3

If these creditors are banks, credit card companies or hire-purchase companies, they will never be keen for you to settle your debts in full; reason being that the longer you owe them, the more interest they earn from you and that sustains their business.

I think it is good to think of loans and debts as you "working for the banks " When you spend so much time and effort to earn the money only to pay so much interest to the banks, are you not in effect indirectly "working for the banks" to let them earn more money from you ?

The bankers who see this are going to hate me ( ha ha) .

You should clear off your loans, credit card bills and whatever you owe to banks as soon as you have the money. I'm sure if you walk into the bank (don't just write) and see the people in charge, insist you want to setttle the loan, they will usually oblige: but there are penalties for paying up earlier than the loan tenure you signed for at the point when you took up the loan. This applies, whether it is a full settlement or partial settlement.

You need to go down personally and talk to the people in charge . It's hard for them to explain to you in a letter , like right now, I have to tell you a long story just to try and help explain to you. :=)

Answer 4

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Answer 5

By agreeing to make a partial payment, you are verifying you owe the debt, so they could come back for the other amount. Get your agreement in writing. By paying the partial debt, the company will update the bureaus, and will make it look like a more recent activity. They can update the reported date, but it is illegal to change the original open date, make sure they don't. Also, when you get it in writing, make sure that the claim shows as paid, not as settled.

Answer 6

If they are in collections, do not pay the full amount. The collection agencies paid pennies on the dollar for the righhts to attempt to collect, whay should you pay all of it back.


When you settle, always ask them to remove from your credit report in return for your payment.


Many will not comply.


Try to get settlements in writing before paying.

If they are in collections, start at 30% and work your way up...


This company:
http://www.expert-credit-advice.com/ has a free creditrepair kit and you can use the free sample letters to offer settlements or you can pay them to do it for you.


They did a fantastic job and really taught me a lot.


They can also clean up your credit...



Good luck and god bless...

Answer 7

The debt collection company or the creditor will take the amount and then close off the account.

It will show on your credit file as satisfied, not paid in full, it will still leave a mark on the credit file as you have not kept to the contract of the credit agreement (paying the min. amount monthly and in full including charges and interest.