Full and Final Settlement

If you're looking for a solution to your debt problems one available option, in certain circumstances, is to make a Full and Final Settlement offer.

In a Full and Final Settlement you arrange to make a partial one off lump sum payment in exchange for the rest of your debt being written off. Typically this is only an option for people who have access to a large sum of money. This may be from re-mortgaging property, selling assets or through a windfall such as an inheritance.

Frequently Asked Questions

What are the benefits of making a Full & Final offer?

What are the disadvantages of Full & Final Settlements?

How do I calculate how much to offer each creditor?

Advantages of Full and Final Settlements

Making an offer for a Full and Final Settlement has a number of potential benefits both for you and your creditors -

  • A quick route to becoming debt free
  • Satisfying the debt may improve your credit rating
  • In some cases a large lump sum payment is preferable to creditors than a series of smaller payments over a long period of time
  • Avoids the costs of bankruptcy

Disadvantages of a Full and Final Settlement

A Full and Final offer can however have some disadvantages and drawbacks -

  • There is no guarantee that your creditors will accept the offer
  • If your creditors know that you have access to a lump sum they may insist that you clear the debt in full

Full and Final Settlement Calculation

When making a settlement offer your payment should be based on a fair proportional basis that reflects the amount you owe to each of your creditors. In this way the creditor who is owed the most receives the biggest share of the lump sum.

The simplest way to calculate how much to offer each creditor is to use the formula -

Total Lump Sum Available multiplied by Amount Owed to Individual Creditor
divided by Total Amount Owed
= Offer to Creditor

For example, if your total debts are £20,000 with £4,000 of this debt being owed on a credit card and you can raise a lump sum of £12,000 then -

£12,000 (lump sum available) X £4,000 (amount owed on credit card)

/ £20,000 (total amount owed)

= £2,400 (offer to credit card company)

In this example you would make an offer of £2,400 to your credit card company. Repeating this calculation for each of your debts will give you amounts for each creditor. 

Full and Final Settlement Advice - call 0800 028 4422

Royal Exchange provides debt help and advice to individuals throughout the UK. No matter what your financial circumstances are we can help you to become debt free.

To find out more about Full and Final Settlements and all other solutions to debt problems call us today on 0800 028 4422. Alternatively complete the enquiry form and one of our advisors will call you back.