A Full and Final Settlement is an offer you make to pay off your debt for a fraction of the amount outstanding. Once you have made the payment, the rest of your debt is written off and you won’t have to worry about it any more. Sounds good doesn’t it?
Where would the Debt Settlement money come from?
You might be wondering how you would come across some extra money when you are in debt. It is not something that happens often but here are some possible examples of how you might get some extra money: –
– You receive a yearly bonus from your place of work.
– You inherit some money.
– A family member has won some money and decides to help you out.
– You have been frugal and saved up a lump sum to pay off some of your debt.
– You have gone mad on eBay and sold lots of things of value.
What happens with your Credit Report when you make a full and final settlement?
The data will normally remain on your credit report unless it has already been longer than six years since the data was entered. If you had late payment markers or received a default then this would still be on your credit report for six years from the date they were first entered. The data will be there normally for a period of six years from the date of the default or when the account was closed for example.
When making a Full and Final Settlement, because you are only paying back a percentage of the debt, any defaults will show partially satisfied rather than satisfied. However the information will still disappear from your report within the usual time period as described earlier on. I am not sure if a potential lender would view a satisfied or partially satisfied default any different. They are both still adverse data at the end of the day.
How do you make a Full and Final Settlement Offer?
Normally you would write to your creditor and make them an offer to settle the debt. You would explain how much you can pay to settle the debt and await their response. I would always start with a low offer and work my way up to something that is mutually agreeable to you and the creditor.
For some debt collection agencies I have dealt with, you can make a debt settlement offer online through their website. For example, on the Mackenzie Hall website they have an option where you can make a Full and Final Settlement Offer usually for a percentage of the actual debt owed.
Is it worth settling debts this way?
It can be because it means you have one less debt hanging around and you don’t pay back the debt in full. If you are not too concerned about the default, (if you have one) being displayed as partially satisfied then yes, I would say it is worth it.
Doing anything you can to get yourself out of debt is going to motivate you to keep on moving forwards. One less debt is one less creditor chasing you for money owed at the end of the day. If you owe money to a lot of people, a full and final settlement can be a big help reducing the list of your outstanding debts.