"Full" or Short" settlement of Debt via Payplan

A question about : "Full" or Short" settlement of Debt via Payplan

Hi everyone,

I haven't been on here for a while, mainly as I have been fairly lucky with my DMP over the last 4 years, so apologies for the plea for help!

I have been given the opportunity by a family member to settle my debts, yay! The amount offered is Ј18k and my debts are c.Ј21k. I have contacted Payplan for advice who advise the options I have are as follows;

Full settlement - where you pay back the full amount owed. This will subsequently show on your credit file as 'fully satisfied' with a nil balance for 6 years along with any Default Notices from their date of registration.
Short settlement - where we negotiate with your creditors to agree on a sum based on what you have available. Creditors are not bound to accept a short settlement, but may choose to do so based on your current circumstances. This will show as 'partially satisfied' on your credit file for 6 years, again, together with Default Notices from their date of registration.
Partial Settlement - where we look to settle some but not all of your debts. Some creditors could see this as preferential treatment if you choose to settle other creditors' accounts, but this is rare.

So I am considering a short settlement but this option appears to have more of a negative impact on your credit rating as far as I can make out? In that case I'm considering asking my family member if they can loan me all the money for a full settlement. Also one particular creditor who is a debt collector send me offers two or three times a year whereby, if I pay half, they pay half of the debt with them, i,e 50%. The majority of the other debts are still with the original creditor (Barclays), so perhaps it would benefit me if I paid more to them (pref treatment though...)
The amount loaned to me by fam member would be paid back out of future inheritance.

Also I've conducted a little research on this forum and it appears as though I could offer a short settlement with the proviso that each creditor shows the account as satisfied?

Any help you can give would be most appreciated as am both excited and confused!
AB
x

Best answers:

• I think, if it were me, I'd either ask the family member for a little more (although that's a bit cheeky) or I'd pay off as much/many as I could with the money offered and take on the remainder myself. You could always spread the money equally between all your creditors to avoid the preferential treatment thing?
  It might be that I'm confused as you are though!
• basically whatever you do they will come off of your credit file 6 years from the date of default (as long as no legal action is taken)
  as long as you have it in writing i would pay settlement figures send each a letter offering 25% and negotiate from there make sure all negotiations are done in writing (you can do this yourself you do not have to use payplan) and that each company confirms that the outstanding balance will not be sold on or further collected on
  most companies will not show it as satisfied if you haven't paid in full but its always worth asking them if they will do it
• Yep. Partial settlement is the normal mark.
  Preferential treatment is only a consideration in an insolvency option (IVA, DRO, bankruptcy) - there must have been a reason why you didn't go for that 4 years ago so I assume that still applies.
  I'm not clear what payplan mean by short or partial settlement - surely these terms mean the same thing?
• Thank you all very much for your replies.
  Hmmm, you are all thinking what I have been thinking. I guess my main concern is how negative an impact a short settlement will have on my credit rating, ie. it will show as partially settled on my credit file for 6 years. Not that I am looking at taking on credit cards or personal loans ever again but only if I wanted to apply for a mortgage or maybe car finance down the line.
  AB
  x
• In my experience Payplan are hopeless at settling debts.
  Negotiate each one yourself.
  I doesn't matter a damn whether your file is marked partially or fully settled defaults remain on your credit file for 6 years regardless.
  Old debts should be challenged for enforceability and possibly settled for lower amounts.
  Research this and other Forums for advice.
• Hi there,
  Thanks to everyone's replies, sorry have been so delayed in responding. My Mum had a stroke and then had to have brain surgery so things have been a bit hectic!
  I have decided to cut Payplan lose and negotiate settlements myself. Firstly, does anyone have a "template" offer letter wording to creditors they may be willing to part with please? I have searched the forum but haven't come across this as of yet.
  Secondly, if one were to offer F&F's making it a condition of the offer that they mark the debt as full and finally settled with the credit ref agencies and that no further collection action is taken, and they confirm in writing to agree to do this, how likely is it they can "go back on their word", so to speak?
  Many thanks for all your help!
  AB
  x
• Look on the National Debtline website...NEDCAB...they have all the model letters you could ever need on there. Good luck. X
• Thanks everyone!
  Just had a bit of a game changer though and kinda stressed now!
  One of my creditors has stuck AP (arrangement to pay) markers since I started the DMP From what I have read on this site and others, AP's are worse than any other marker on your credit file!
  So even if I settle the AP creditor in full, the cra's can keep the AP markers on for another 6 years after the account is settled and closed! I wish they'd all defaulted me now!
  If this is the case and my credit file will be shot because of this for yet another 6 years, I may as well offer all the creditors as small amount as I can get away with and be done with it!
  And I thought settling my debts would leave me free after my defaults drop off in 2 years. V disheartened now
  AB
  x
• Think it may be worth just stopping all payments to this creditor and get them to default me asap!
• Hello there.
  Here's a link to our full & final settlement fact sheet, there's a useful sample letter at the end.
  The suggestion of making information requests by using your rights under the Consumer Credit Act is a very good one. Often creditors may consider far smaller settlements if both parties are aware that there could be issues with the paperwork - such as missing a key 'prescribed' term or your signature. I think you should look to make such a request for any agreement that you entered into before the 6th April 2007. There is a sample letter within this fact sheet.
  As far as 'partial settlements' are concerned, we put the question about how they effect a credit score to Experian; here's their answer:
  The outstanding balance will be changed to zero to reflect that no money is due; but the P flag will show that it was not paid in full.
  Experian also advised that they don't currently believe such flags are usually used in credit scoring, but they could well be included in a lender’s underwriting policy rules. This could mean that the appearance of a flag on a report would trigger a manual review of the application, where the additional information could then be considered by one of the lender’s underwriting experts.
  I really hope that you find this information useful.
  Very best wishes,
  David @ National Debtline.
• No reason to be disheartened, the whole point of the exercise is to become debt free. Doing that as quickly and as cheaply as possible.
  Now, your credit file will be a mess but you could maybe get a card THAT YOU PAY OFF IN FULL EVERY MONTH, without fail. That way you are showing potential lenders what a good egg you are.
  I don't know what your plans are regarding more getting into more debt in the future, hopefully it's just a mortgage or something so having a card that's clean will help that.
  You've worked really hard to get this far, so just get rid of the debt and forget the credit file for a while and......enjoy your debt free life when you get there.
• I negotiated my own full and final settlements and cleared Ј39000 of outstanding balances with Ј26000. some took 35% straight away others wanted 90%.
  I just wanted to do it as cheaply as possible, I felt no guilt in not paying the full amount as they had all made thousands out of me over the years.
• BTW I've finally got used to replying in "quote mode", as you will have all noticed lol
  Thanks in anticipation of all your advice I hope the lessons I learn through this experience I can impart to others on this forum.
  AB
  x