A reader has asked how Full & Final settlements (F&Fs) would affect her credit rating which is currently looking good as her debts were all defaulted and have dropped off her credit record.
A full and final settlement happens when the creditors agrees to accept an amount which is less that the total owed to settle a debt, and agrees that the debtor will not be pursued for the remainder. For more details, see this Guide to Full & Final settlements.
This article looks at how F&Fs are shown on a credit record in the two different situations:
- where the debts are still showing on your credit record, and
- where the debts have already disappeared.
Lenders often say that a partial settlement will be very bad for your credit record… but often it won’t be! So it’s good to know all the details.
Some different names for this
F&F settlements are often called partial settlements, because you don’t pay the full amount, only part of it.
Creditors usually mark the debt as partially settled on your credit record rather than settled.
If the debt has previously defaulted, the term settled is not used and the term satisfied is used instead. A F&F settlement on a defaulted debt is then marked as partially satisfied. I talk here about settled debts because that is is how creditors normally talk to you, even though the credit record term is normally satisfied.
Debts that still show on your credit record
When you settle debt, partially or in full, the balance is set to zero. The debt will then disappear from your credit record six years after the original default date.
If the debt hasn’t defaulted, it will disappear six years after the settlement date. But it is unusual for a creditor to accept a F&F unless a debt has defaulted. You may want to ask for a default to be added, see What should the default date for a debt be? for more about this.
It is common for a creditor to tell you that the debt will stay for six years from the settlement date.
This isn’t right if there is a default date on the record! It will drop off six years from the default date whatever you do.
How does a partial settlement affect your credit rating?
Your credit score is a complicated calculation looking at lots of different factors.
Partial settlement is a marker against a debt, That marker isn’t taken into account in the credit scores published by Experian, Equifax and TransUnion that you see when you look at a credit report.
Lenders don’t use the credit scores that you can see. Each lender can have their own rules about what is on your credit record that they want to take into account.
So it’s possible a lender may see a partial settlement marker and decide not to lend to you. This is only really likely though for very large credit applications – mortgage or car finance say.
Most lenders won’t care if you have partially settled the debt. They may think it’s good that a debt is gone – because with one problem less, you are more likely to be able to repay what you borrow from them!
And some lenders will reject you just because there was a default, even if you have settled the debt in full!
So it can be hard to decide if paying the extra money is worth it – there may only be a tiny number of lender that may make a different decision if you partially settle or fully settle a debt.
Think about the size of the discount you can get and how long the debt will stay on your credit record. For example:
- if the creditor will accept £500 to settle a £1,500 debt that is a big discount. And if the debt will drop off in the next year, it’s probably a good idea to grab it!
- if the creditors will only accept £1,300 to settle that £1,500 and the debt is still going to show for another four years, you may think it’s worth paying more to get the debt marked as fully settled.
The rest of your financial position also matters:
- with lots of problems on your credit record, getting one debt marked as partially or fully settled probably won’t make much difference at all;
- if you can’t afford to repay all your problem debts, it’s usually better to settle as many as possible partially, rather than take longer to repay them in full.
Wanting a mortgage is the most difficult situation – I look at it in detail in Will partial settlement make getting a mortgage harder?
Debts that have disappeared from your credit record
A defaulted debt drops off your credit file after 6 years, which is why the questioner is no longer seeing these old debts on her record. But would settling one bring back the debt? You can see why she wouldn’t want her new, clean credit record spoiled by having some partial settlement indicators added to it…
The answer is simple – after a defaulted debt has gone from a credit record, it will never re-appear. You can offer a F&F settlement on these debts and not risk them coming back and damaging your credit score. If a creditor tells you that a partial settlement will be shown on your credit record for another six years, they are wrong.
This also applies to CCJs that have dropped off after 6 years. They will not reappear if you settle them with a partial settlement.
Once a debt with a default or a CCJ has gone from your credit file, the only lender that will know about it the original creditor. So don’t make the mistake of applying for a mortgage to NatWest if you originally defaulted to RBS, or to Halifax if you defaulted on a Lloyds debt.
Why offer a F&F if the debts have disappeared?
You might wonder why the questioner would bother making Full and Final offers on debts which have disappeared from a credit record. There are two reasons why trying to settle old debts is a good idea:
- a debt that isn’t showing on your credit record still exists. Unless it is statute-barred the creditor can still chase you for the money. See Do I still have to pay a debt which isn’t on my credit record? for more details.
- if you apply for a mortgage or a re-mortgage the lender is likely to ask about all your debts, not just check your credit record.
So as defaulted old debts can often be settled for low Full and Final offers, it makes a lot of sense for the questioner to try to deal with hers.
Getting settlements on old debts
No calls about a debt for years?
Improve your credit score for a mortgage
Andrew says
Hi, we are almost 6 years into our DMP and are now in a position to make full & final settlements. All of our debts were defaulted fairly early on, so I understand that partial settlement won’t cause a new marker for 6 years. Can I just check though, is this still the case where the debt was sold on to a debt recovery company?
Sara (Debt Camel) says
yes, it is still the case. The debts should have a default date on them and will drop off 6 years after that date, whether they are settled in full, partially settled or still being paid.
You may want to read this first before making an offer: https://debtcamel.co.uk/settlements-old-debts-cca/
nava says
hi, SARA
I received partial settlement offer from the creditor.,
It is important to note that on payment of the agreed amount ,you will no longer have any further liability to pay the remaining balance and we will not request any further payment.
if you decide to pay the remaining outstanding balance at a later date, an update would be provided to the credit reference agencies to show the debt as satisfied,
what is the meaning was they will expecting more payment or they will close the account ?
nava
Sara (Debt Camel) says
Ask them if they will mark the debt as partially settled with a zero balance owing on your credit record.
How long ago was the default date showing on your credit record?
Emra says
Hi. I have recently received n1 claim for ccj. The debt collecter is taking me to court fior a debt that drop off my credit report. So, the defaulted debt is older than six years and doesn’t appear on my credit report anymore. I am willing to pay the debt. If I want offer to pay the debt but by installments, a payment plan. My question is would paying monthlt it still appear on my credit report?. guess it is too late now to offer them
full and final settlement.
Sara (Debt Camel) says
what sort of debt was this?
were you sent a Letter before Claim, sometimes called a Letter Before Action? See https://debtcamel.co.uk/letter-before-claim-ccj/ for what one looks like/.
Can you afford to pay the whole debt if you had to – what is the rest of your financial situation like… do you have any other debts you have been ignoring?
Charles says
I owed money to a bank and defaulted since 2008.Its 2020 and now a debt collector want to collect for them via partial settlement. It’s affordable so i want to accept. Would it disappear from my credit file after paying them since the debt goes beyond 6yrs. It’s listed on my credit file for now eventhough it’s over 6yrs.
Again, a CCJ was registered against 3yrs against me using my years ago house. I had moved when the court letters arrived.Can I ask them to remove since I didn’t recieve the letter to act and negotiate payment . Thanks
Sara (Debt Camel) says
The money owed to a bank – was this a loan, credit card or overdraft? Which bank? Has it been sold to a debt collector?
The CCJ – talk to National Debtline about your chance of getting this “set aside”.
Erin says
Is it illegal for a debt collector to list a partial settlement as paid in full? I’m trying to negotiate a F&F payment where it does not show up on my credit report as a partial payment. And what if the collector doesn’t accept an offer? What leverage or options do we have if we can’t offer any higher?
Sara (Debt Camel) says
It’s not illegal but it is against the credit reporting rules because it would not be accurate so not many creditors are prepared to do this.
Partial settlement markers do NOT affect your credit score. It’s up to an individual lender whether they care about them – many just ignore them.
Can you say some more about your situation – what is this debt? How one ago dud you default on it? Has it been sold to a debt collector? Are you currently making payments, if so how much a month? How much are you proposing to offer and where does that money come from?
Ash says
Hi
I have an outstanding default debt of £10k, company agreed a partial settlement of £6k. The default date was 3 years ago so 3 years left till it drops off however I was looking to apply for a mortgage next year. so just wanted to know does it make a difference to lenders and credit report if I partially satisfy or fully satisfy a debt?
Many thanks
Sara (Debt Camel) says
This is hard to say. Some lenders may care. But some won’t and will prefer you to have the extra 4k as a deposit!
Make sure when you apply for a mortgage that you go through a good broker (eg London & Country or Habito) and tell them about this so they can make sure you apply to a lender who doesn’t mind.
What is important is that the debt is settled as soon as possible. Many lenders prefer all defaults to have been settled more than a year before a mortgage application.
Viva says
hi, Sara, thanks for your help and support,
this is my last settlement offer , Santander agreed partially settlement offer , I paid, now they send the letter which says
I am writing with regard to you recent payment which has paid of the outstanding on the above account.
I can confirm that your account has been registered with credit reference agencies to which we subscribe and will be marked as partially satisfied. This information will remain registered for six years from date of default.
If you wish to pay the rest of the outstanding balance, you can do so by sending payment to above address, quoting the account number. Once the full outstanding balance has been repaid, an update would be provided to the credit, reference agencies to update the file as satisfied although the default information would still remain for six years.
My question is I paid £1303.56 for partial settlement but do they still want money from me? Can you give me advice please?
This account was not CCA, and this is 10 years old account, the default on the credit file is gone.
Sara (Debt Camel) says
This isn’t on your credit record any more and they couldn’t produce a CCA agreement for the loan?
viva says
hi, Sara,
yes, 30% agreed partially settlement offer, what will happen next. this is credit card.
thanks
Sara (Debt Camel) says
please talk to a debt adviser eg National Debtline on 0808 808 4000.from what you have previously said you have mortgage problems. I don’t know why you would pay to settle an unsecured debt which is not on your credit record and where no CCA can be prooduced. I can’t help you here.
MoneyWoe says
Afternoon.
I currently have a loan that has not defaulted (only missed payments), even though I have not paid anything on this for 2years – it was a 12mth loan.
I have today had redundancy money come through and have spoken to the company concerned about paying it off.
They have said I have two options.
1 – Pay off the amount in full
2 – Pay 80% of the amount as Partial Settlement, which of course it will be marked as this.
At present I have 3 loans (inc this) and 2 credit cards that are active with 1 credit card that defaulted at £150 that is now marked as satisfied.
Just trying to figure out would it be foolish of me to pay the 80% and jeopardise credit report?
If I could please have your advice.
Sara (Debt Camel) says
How long is it likely to be until you are back in work? because really that has to be your top priority, not settling unsecured debts. See https://debtcamel.co.uk/redundant-debts/
Are you buying or renting? Any priority bills in arrears – council tax, utilities?
Who is the lender here who has made a mess so far of credit reporting? It’s always hard to know what to say in a situation like this, as it’s perfectly possible they will look at your credit record and go back and add a default…. which would be quite right.
How large are each of your debts ?
Paul says
Hiya
Long story short, IVA in May 2014 with 6 accounts defaulted (IVA settled in 2017 3 years in) then in May 2020 (6 years after accounts defaulted) all accounts were removed from the credit reference agencies so all good.
Issue: Last Month in November 2020 one of the accounts is re added to the credit reference agencies because they have just got round to adding a settlement date of of 12/2017 and additional notes stating Partially Settled.
I have contacted the company for this account and they say they are have problems with their credit reporting systems and cant help me at all but it may get corrected sometime in the future (Not Helpful)
Credit Reference Agencies are saying there is no issue and the data is correct so it will remain on my credit reports for 6 years from 12/2017 until 2023 even though they should be able to see it defaulted in 2014 from there previous records. I have paperwork that proves the above but no one seems interested.
So what can I do? this means it will be on my credit file for a total of 9.5 years if its not removed.
Any help would be most appreciated
Thanks
Sara (Debt Camel) says
who is the creditor with the problems?
Paul says
Nationwide CC
Sara (Debt Camel) says
oh! That I did not expect.
I suggest you go back to Nationwide, send them a formal complaint and say you want this resolved within 2 months plus £100 for the inconvenience or you will be sending the complaint to the Ombudsman.
Paul says
Hi Sara, thank you so much for your help and fast response, That’s what I hoped your response would be and that I was within my rights to request removal.
I have contacted them twice once through email complaints and also by telephone but to no avail so I will do a recorded formal complaint letter to their complaints department and then onto the ombudsman if needed.
Thanks again for your time and help
Paul
James says
Hi Sara,
Hope you had a great xmas and new year, i decided to bit the bullet and get a partial settlement for my 8 lowell accounts.
Can I ask does your credit score increase when you partially pay a debt? or is it just the exact same as not paying it?
Sara (Debt Camel) says
No increase at all. And it wouldn’t increase even if you paid them in full, either.
It makes no sense but them’s the rules.
That’s why it’s better to pursue the affordability complaints where possible as your credit record will impove if you win.
Also read https://debtcamel.co.uk/settlements-old-debts-cca/
James says
Thanks Sara, should i really make offers to them then or just ignore the debt completely? It makes no sense.
My end game is within 5 years to get a mortgage.
Sara (Debt Camel) says
The debts have to be settled, not just dropped off your credit record, before you can get a mortgage. And settling them stops any chance of a CCJ…
James says
Thanks Sara, will partially settled cause any issues when trying to obtain a mortgage or as long as they are showing as settled the mortgage lender will look favourable on it?
Sara (Debt Camel) says
Partial settlement only matters if the debts are still showing on your credit record when you apply for the mortgage. And even if they are showing it may not matter much. See https://debtcamel.co.uk/dmp-partial-settlement/fir details.
James says
Perfect so if i get all my debts to partially settled although my credit rating wont improve i still have a chance of getting a mortgage earlier?
I also have pay day loans showing on closed accounts as paid and settled, i take it this will affect my mortgage chances?
I had credit cards and mobile phone contracts included with Lowel.
I understand that in order to get my credit file up I need to be able to get credit. Will the credit card and mobile phone companies give me another chance in the future or will i now be bared from using them.
Sara (Debt Camel) says
How old are the payday loans?
Are all the debts defaulted, if so how long ago are the defaults?
James says
Yes most of the debts are defaulted 1 is 12 years old but I stupidly made a payment 6 months ago before being aware of statue barred and some are within the last year.
I tried for 30% they came back with 50% I am now saying I will pay 50% over a year if they clear the 12 year old account and also another.
The payday loans are mainly from 2017, I thought when I won the affordability claims they would have came off all together but not so I guess.
Capital One £300 – £50 per month starting January 31st
Orange £150 – £1 per month starting January 31st if this was reduced to £50, I would pay today – 12 year old debt
O2 £1531.99 – £50 per month starting January 31st
Vodafone 916.81 £30 per month starting January 31st – will pay more when debts cleared – t
Vanquis 130 – I will clear by January 10th
EE 1273.45 – £30 starting January 31st per month increase when other debt clear
Niall says
Hi Sara.
Please can you help I’ve have a debt from essentially a pay day loan. It’s for £670. They have offered me £503 to partial settle this. It is defaulted but not 100% sure when that began. Do you think it’s worth continuing to pay £20 a month till 2024 to clear this or just taking the partial settlement?
Thankyou
Sara (Debt Camel) says
who is the lender? did you have other loans from them before this one? Can you afford that much?
Martin says
Hi there.
I have been paying a loqbox account for the past 9 months (£70) without missing a payment. I have also been paying my credit card in full for the past 6 month (£50). It’s a £200 limit credit card but I only use £50 of it each month on petrol.
For the past 3 month my credit score has went up. Will this be the case every month now? Or will I get months where my credit score goes down even if I’m doing the same payments every month?
Also is there anything else I could do extra to increase my score?
This time last year my score was 120 on clear score and now it’s at 321
Weatherman says
Hi Martin
Your credit score depends on a bunch of factors. All else being equal, if you keep making these payments your credit score certainly won’t decrease, although it might ‘plateau’ at some point.
This page has some useful information on what else you can do (other than ‘keep doing what you’re doing!’) – the main one is make sure you’re registered to vote: https://debtcamel.co.uk/credit-score-change/
Your score is a reasonable ‘finger in the air’ as to your creditworthiness – but don’t forget that’s just to give *you* an indication, lenders will all use the information behind the score a bit differently.
Sara (Debt Camel) says
I agree with Weatherman, you score won’t drop unless something bad happens, But at some point it will stop rising because if the LOQBOX and credit card accounts.
However the bad bits on your current credit record will be getting older and will eventually drop off, so that will help your score.
Time tends to resolve credit. Record problems and when they go, your new accounts will be the only thing showing and at that point they willlook great!
Martin says
Thanks for the feedback, appreciate it!
I’ve done everything I can to improve my score (register to vote etc.) At the start of last year I paid my defaulted accounts, I know there’s nothing else I can do with that apart from wait until they fall of my file. My loqbox ends in 3 months and I’m just planning on continuing to use under 30% of my credit card and paying it off in full every month.
Is there anything else I can do to keep my credit score rising or will it just stay roughly where it is?
Sara (Debt Camel) says
If you can still save money, another LOQBOX account will help.
You could ask your credit card company if they will increase your limit to £300 – that would be a small help as limits under £200 have a small credit score penalty (see https://debtcamel.co.uk/credit-score-change/). But many companies won’t up limits at the moment.
Chance says
Hi there, glad I found this website, it’s been really helpful :)
I currently have 5 accounts that defaulted between 2017-2019, four of them are with debt collection agencies and one with the original creditor. Partially settling would allow me to pay them off quicker, I’m not clear on if paying them in full or partially settling has an advantage/disadvantage.
Any advice for me :)
Thanks
Chance
Weatherman says
Hi Chance
Any debt you can get settled, whether in full or in part, makes you look better to lenders. This change won’t show in the credit score that you see – because the debt’s defaulted – but importantly it *will* show to lenders.
Some lenders will only care whether the debt still exists; others might prefer you if you paid it off in full rather than in part. It really varies, so think about what you can afford and start from there. Good luck!
Bill says
Hello Sara,
I’m glad I stumbled across this site.
Hopefully you can offer me some advice.
In early 2014 I made a foolish mistake and started to gamble. Within 6 months I had maxed out a Natwest loan, credit card and overdraft totalling around £7,000. I entered a DMP fairly soon after but stupidly continued gambling on and off till 2018. I owe just over £14,000 going by my Payplan account.
I have 11 creditors in total.
Cabot £4,653.71 (Natwest Loan & Overdraft)
Wescot £1,213.65 (Natwest CC)
PRA £1,847.11 (MBNA)
Moorcroft £553.73 (Halifax)
Moorcroft £1,254.81 (Vanquis)
Lowell £455.90 (Capital One)
Lowell £1,624.85 (Hitachi)
Link £755.70 (Barclaycard)
Lantern £584.55 (CTL)
Lantern £739.00 (CRS)
ARC £413.79 (Cash EuroNet)
The Natwest account (currently with Cabot & Wescot) has dropped off.
I have over the last year or two been sent letters being offered a 70% reduction on Natwest debt but was out of work (universal credit) so continued to make token payments. PRA and Lowell have also sent offers of 70 and 50%.
My situation improved in October 2020 when I started working. I’d like to take them up on these offers as I have around £2,000 saved.
I’m just apprehensive what the other more recent creditors will think if I partially settle these 4 accounts. My main concern is getting CCJ’s
Many thanks
Sara (Debt Camel) says
Offering F&Fs in general is a good idea although there are a couple of other things you might consider, see below.
If you settle some debts with a F&F, the other debts in your DMP will get more each month – they are unlikely to mind let alone go for a CCJ.
The other things to think about:
1) are all the debts enforceable? You cannot be taken to court for a card or a loan if the debt collector can’t produce the CCA agreement for the debt if you ask for it (doesnt apply to overdrafts). Sometimes a debt collector will have paid a very low price to buy a debt and they won’t be able to go back and get the agreement from the original lender…
So read https://debtcamel.co.uk/settlements-old-debts-cca/ and see if you want to try this.
2) you may have a good case to win an affordability complaint if the loan repayments were too high for you or the credit limit was set too high.
This is more likely for the debts taken out after your DMP started.
Read https://debtcamel.co.uk/refunds-catalogue-credit-card/ for credit cards
And https://debtcamel.co.uk/refunds-large-high-cost-loans/ for large loans
And for the Cash Euronet put in a claim TODAY as it is the last day you can, don’t dither, just do it: https://claims.casheuronetuk.co.uk/
If you win these complaints you may get the balances reduced, even a refund, and any negative marks are removed from your credit record.
Bill says
Many thanks for your speedy response.
I decided last year to make a complaint to the financial ombudsman in regards to Natwest offering me a credit card and loan back in 2014 when I had originally wanted to see if the overdraft I had maxed out could have interest payments frozen due to gambling.
They decided Natwest acted responsibly even though my account was erratic at that point. The gentleman who sold me the loan ticked that I needed it for a car (I live in London so no need for a car). I never asked him to do that. And apparently they said they carried out an income and expenses check that I certainly didn’t sign.
I emailed proof that I was also in rent arrears at the time but to no avail. I take responsibility for my mistakes but looking back natwest was the catalyst in this mess.
I’m unsure whether to ask about a CCA because Natwest have only changed to Wescot & Cabot in that time.
Another quite old debt MBNA (2015) has only been passed on once to PRA. It makes me think a CCA would be quite easy to find.
I did put in a claim for Cash Euronet in late Nov 2020 but was emailed I wouldn’t be receiving any refund in December.
My credit report strangely doesn’t include ARC or two Lantern debts.
I will take your advice about the other credit cards I took out after the DMP but to be honest I’m not sure when applying for them I was completely upfront about my situation in terms of debt when applying.
Many thanks
Sara (Debt Camel) says
Was your Natwest decision from an adjudicator or an Ombudsman?
It is common for a debt purchaser to not be able to produce the CCA agreement even if this is the first sale.
There is no reason not to ask Cabot for the CCA agreement. Ditto PRA. You may think the CCA may be easy to find in theory, but the debt purchaser may have had a low price agreed on condition they never go back and bother the lender again.
I can’t say which requests will work, it’s up to you what you want to try.
What credit report are you looking at?
Bill says
Got my dates slightly wrong.
I made a complaint in 2019 to the ombudsman regarding Natwest and got a reply in early 2020 with a decision I disagreed with.
It was sent for a final decision mid/late 2020 and I heard back just before the end of the year that they had come to the same conclusion. I disagreed with this so I think that’s as far as I can take it.
Interesting they decided to look at the complaints separately even though I was sold the credit card and loan at the same time. The final decision was for the loan.
Natwest contracted me two weeks ago about my complaint about the credit card and I received an email a few hours later saying they acted fairly.
Btw I still get statement from Natwest now and again for the loan and credit card even though these were closed (I imagine) some time ago.
I’m using Credit Karma, clearscore, and Totally Money. Experian I don’t find that helpful as it only gives a score.
Sara (Debt Camel) says
Totally money gives you the same data as credit karma. To check Experian for free, see https://debtcamel.co.uk/best-way-to-check-credit-score/
Bill says
Thankyou for your help Sara
Going forward I’ll ask PRA, Cabot and Wescot for proof of CCA’s
I’ll make a complaint to Barclaycard, Capital One and Vanquis to see if I should have been offered credit in the first place.
As I said I don’t think I was truthful when filling out the form for credit, I didn’t tell them I was already in debt due to gambling so we’ll see what happens.
Halifax credit card was an old card from 2013 so I won’t make a complaint.
Any idea why the ARC (quick quid) and two Lantern debts (Credit Resource Solutions & CTL) don’t appear on my report?
Sara (Debt Camel) says
A lender should not take your word on an application for credit without checking eg at your credit records. If they showed debts which you had missed off, they should have been a cause for concern.
The missing debts may get added to your credit record at some point. Usually the most inconvenient for you!
Bill says
Ok, many thanks for the advice.
Still seems a bit strange as the two Lantern and ARC debt are almost 4 years old. I may just get in touch with them next week and see what the situation is.
Sara (Debt Camel) says
I would definitely ask for a CCA agreement for them.
Bill says
Thank you
Having just looked at my accounts I can see 3 defaulted in 2015, 5 defaulted in 2016, 2 defaulted in 2017 and 1 in 2018 (I think this one should also be 2017
I think I will ask all 11 creditors for proof of CCA and see what happens.
The Lantern debts look like having originally been with Lending Stream and Wage Day Advance
On my Credit Karma report Quickuid is showing as both an open and closed account.
Martin says
I have a £200 credit card limit, every month I only use £50 of my credit and no more. Would there be any benefit if I increased my limit and still use £50 of my limit every month? Would it help my credit score in anyway?
Sara (Debt Camel) says
See https://debtcamel.co.uk/credit-score-change/
Are you paying off the balance in full each month?
Martin says
Yeah I’m spending £50 of my £200 balance and paying it off every month in full
Russell says
Dear Sara,
I have several debts including mobile phone, council tax, teaching course debt, and an old Halifax overdraft debt from 2013, all of which I’ve left for a while but am finally getting round to dealing with. I’m also on UC, which is just about keeping me afloat.
A debt collection agency has offered partial settlement on the Halifax debt, 80% off by end of Feb.
My friend says he could help me pay the debt at 80% off. But we’re worried that it might be seen as preferential treatment over other creditors if I needed to get a DRO in the next year or two.
Also, I haven’t got any records so don’t know if it’s statute barred.
The council tax debt is not being chased heavily at the moment and I’m hoping to get the Council to take it back since I’m now on UC… with suspensions on the rest while I try and find a new job.
What do you think about taking the 80% settlement offer?
Thanks,
Sara (Debt Camel) says
How much do all the debts add up to?
How large is the overdraft debt? The council tax debt?
Would your friend need to be repaid at some point if is this a real gift?
If you get a new job, will you be able to start making meaningful repayments to all the debts? We will soon be into the next council tax year, so you need to be able to start paying that as well?
Russell says
Overall debts are about £4K, council tax around £430 including £75bailiff charge. Overdraft £1,200. Teaching course the other biggy.
Yeah, UC is seeing me right on council tax, food and bills. Friend can be trusted, yes, absolutely.
Hard to say about making meaningful payments. Was in the personal fitness world before the pandemic, but made unemployed shortly before March and fell through gaps in support.
What counts as meaningful? Reckon I could manage £10-30pm depending on finding new work. (On each debt) Thanks!
Sara (Debt Camel) says
So thoughts:
– it can sometimes be hard to tell when an overdraft is statute barred because there are no regular monthly payments required so how can a bank tell when they were routinely being missed? You can talk to National Debtline on 0808 808 4000 about this to find out more. If the debt is statute barred paying it would be a waste of your friend’s money.
– yes making a preferential payment can be a barrier to a DRO. But as the money is coming from a friend this may be seen as less of a problem if your friend writes you a letter/ email saying he will only offer you the money if it can be used towards the full & final offer you have been sent.
– the council tax debt is not going to go away even if it gets called back from the bailiffs now. Councils have gone very soft on this for the last year of necessity but that is unlikely to last and I think it would be foolish to hope that will continue for the next year.
– when you are back in work you should aim to repay priority debts such as council tax as soon as possible, with non-prioritry debts such as this old overdraft getting a token £1 a month payment
– the DRO rules are being reconsidered at the moment, see https://debtcamel.co.uk/proposed-dro-changes/. by guess is the proposed changes will be made from May. At that point you would be allowed a DRO even if you had spare income of £100 a month (provided you met the other criteria). So it could be realistic to hope that if you had a DRO and then found a job, your DRO would be able to continue.
– £4000 is not a lot of debt for a DRO but it sounds as though your finances were pretty marginal before the pandemic? In which case it may be better to go for a DRO now and get a frech start.
I suggest you talk to National Debtline about the overdraft debt and whether a DRO would be a good option for you.