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Full and Final Settlement

Making the most of a windfall – making a Full and Final settlement

Sometimes a windfall can come your way, and this can put you in a position to make a Full and Final Settlement to your creditors.  If this happens to you, then it gives you another potential way of dealing with your debt.

It could come in the shape of anything: from an inheritance: to a money gift from friends and family: a redundancy payment; or even a lottery or other betting win.  Alternatively, it might come from a source such as a lump sum in a final pension arrangement, an equity release scheme, or from re-mortgaging your home or realising the value of an asset (such as property, investments or another item of value).

TC Debt Solutions helping with full and final settlement

Clearing your debts for less

What is necessary for a full and final settlement?

A Full and Final Settlement happens when a creditor agrees to two things.  The first is that they will accept less than the whole debt in order to clear the debt in ‘full’.  The second key point is that they agree that they will not take any action to recover the remainder of the debt (this represents the ‘final’ part of this debt solution).

A Full and Final Settlement does not always have to come from you: it could be the case that a creditor will write to offer you a Full and Final Settlement too.  This happens typically if you are already in a debt management plan – or if you have defaulted on the debt.

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Our expert advisers will get the best deal

Can you negotiate with creditors for debt settlement?

If you do have access to money to make a Full and Final Settlement offer, then you can negotiate with creditors for debt settlement. You do not have to make the same offer to all your creditors.

You need to be sensible when it comes to making an offer.  If you do not have a lot of money you need to work out which creditor to pay off.  You might be able to get a creditor that you owe say £4,000 to accept an offer of £1,500 for instance.  That is one creditor and one debt off your list, even if your total debt amounts to £30,000.

It is possible to negotiate with your creditors, but it can be hard to work out an offer that is likely to be accepted.  This is where the debt advisers at TC Debt Solutions can help you.  Our expertise and experience mean that we can weigh up an offer so that it has the best chance of being accepted.

We know the right supporting evidence and background information that will persuade creditors of the true value of your offer.

Settling if creditors offer a full and final settlement

We can drive down the settlement amount

What happens if your creditors propose a settlement?

This is most likely to happen if you have been in a debt management plan for a while – or you have not been paying anything. If you do get an offer, we can discuss it with you to identify how good it really is and how you might be able to find the money to accept it.  We can also negotiate on your behalf to see if we can drive down the creditor offer.

Such offer letters require close scrutiny to be sure that a creditor really is writing off the remainder of a debt.  We will ensure that this is the case and will document everything thoroughly for you to ensure that all goes smoothly and that you have total certainty now and for the future that everything has been settled properly.

We are here to help

Common questions on full & final settlements

What is a good percentage to settle a debt?

In a full and final settlement how much to offer is always the big question.

We can advise you on full and final offer percentages that are based on your particular circumstances and the history of your debts and any payments that you have made/not made to date.

How long does a debt settlement stay on your credit report?

If a debt has been defaulted, it will drop off your credit record after 6 years.

A full and final settlement will not alter this fact or make the debt stay on your credit report for longer.

How does a settlement affect your credit score?

The chances are that your credit score is going to be very poor to start with.  The good news is that you now have an opportunity to start clearing your debts and working towards a better credit score future in the years ahead. We can advise you of your strategy to clear off your debts and show you how to improve your credit score in the future.

Advising you how to make the best offer

How do you offer a full and final settlement?

If you are offering your creditors a Full and Final Settlement, then it is advisable to explain the source of your funds.

You might explain, for example, that a relative has offered you the sum to help you clear the debt with the creditor.  Preparation and thoroughness are everything in making a Full and Final Settlement offer and trying to head off any possible objections on the part of creditors.

So providing an income and expenditure spreadsheet to accompany your letter is a good tactic as it will demonstrate to the creditor that they are going to have to wait a very long time before you will have paid off the debt; they need to balance that prospect against the reality of an offer of real money right now.

At TC Debt Solutions, we can advise you of how to make the best offer in all cases.

Getting The Best Deal

The first decision to be made is whether you wish to pay off one particular creditor or make an offer to all your creditors. Again, our experienced advisers will help you with this, based on a full discussion and understanding of your complete personal circumstances.

If you or we decide together on a course of action to pay a number of creditors, the calculation is as follows. To work out the amount that you need to offer, you multiply the lump sum that you have available by each individual debt, and then divide by the total amount you owe to all your creditors.

So, let’s say you owe a total of £20,000 and can raise a total of £8,000 as your lump sum.  You owe a number of creditors who include Mastercard (£12,700), £1,300 to a store card and £6,000 to the bank.

In the above example, you would calculate the repayment as follows (taking the example of the Mastercard debt):

£8,000 (your total lump sum) x £12,700 (the debt you owe to Mastercard)

÷  £20,000 (the total amount you owe to all creditors)

= £5,080

You then make the same calculation for each of the other debts.

However, as stated above, this might not be the right course for your circumstances.  It all depends on: your current financial situation; the amount you owe; the amount you have available; the history of your debt repayments; and your age and health.

You can make a fresh start

What are the advantages & disadvantages of a full and final settlement?


The advantages of a Full and Final Settlement are as follows:

  • Your debt will be paid off and you can make a fresh start
  • Your creditors will mark your debt as ‘settled’
  • Clearing your debt means you can start to improve your credit score or credit rating
  • If you pay off even one creditor, you are still driving down your debt position
  • If a debt has been defaulted, it will drop off your credit record after 6 years. A Full and Final Settlement will not alter this fact or make the debt stay on your credit report for longer.


There are a few key disadvantages:

  • You need sufficient funds to be able to make an offer
  • Your creditors may demand full payment of your debt

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If you are looking to make a full and final settlement to your creditors, discuss the pros and cons, or get advice on how much to offer, complete our short form and we will contact you.

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