What are the different types of debt settlement, and how could they be used to clear your debts?
This could be a suitable debt solution if you have access to a lump sum of money but it isn’t enough to repay all your unsecured debts in full.
If your lump sum isn’t enough to repay all your unsecured creditors in full, there are various options for you to consider, depending on your financial circumstances:
- Full Repayment of some debts: You could use your lump sum to repay one or more of your debts in full, and negotiate an affordable repayment arrangement with the rest of your creditors. However, you do need to make sure this is done as fairly as possible, and all your creditors are considered accordingly.
- Short Settlement offer: (sometimes called a ‘Full & Final Settlement’) You could offer some/all of your creditors part or all of your lump sum, on the condition that they agree to write off your remaining debt to them. This is more likely to be accepted if you have little (or no) disposable funds with which to make your regular unsecured debt repayments. Bear in mind that your creditors don’t have to accept your offer – they may simply reject it, or ask you to increase your offer.
- Part Repayment: If your creditors have declined your Short Settlement offer (or you’ve decided not to do this), you could consider making a lump sum payment towards your outstanding debts. This means you divide your lump sum amongst some or all of your creditors, and make payments to reduce your outstanding debts to them.
What is the advantage of using a Debt Settlement?
The advantage of a settlement is that your unsecured debts can be cleared or substantially reduced straightaway, making repayments on your remaining debts (if any) more affordable.
What is the disadvantage of using a Debt Settlement?
If your settlement involves only repaying part of your debts, this could have an ongoing adverse effect on your credit rating. Even though you may have come to a satisfactory arrangement with your creditors, any Default Notices or court action (e.g. CCJs) taken against you will still remain on your credit file for 6 years from the date they were registered. However, your creditor should mark your debt as ‘satisfied’, so that future searches on your credit file will show that you have dealt with your debt successfully and owe no further money to that creditor.
Struggling with debts? Contact us today!
At PayPlan, we like to do things differently. We see debt as a PART OF LIFE so we can discuss a wide range of practical debt solutions that help people to deal with their debt and get on with living their life.
The best way to find out what makes us different is to call us free on 0800 280 2816 and have a chat with one of our fully trained advisers. They’ll listen to you and talk about you, your life, your debt and your aspirations. You’ll find them understanding of your situation and helpful in your search for a solution that’s right for you.
If you already think that Debt Settlement is the right choice for you, call our advisors today on 0800 280 2816 for confidential, no obligation advice. Or you can complete and submit our online Debt Help form and we’ll call you back.