Full and Final Settlement Offers

A Full & Final Settlement Offer is an offer of part payment to creditors in the form of a one off lump sum payment in turn for having the remainder of the debt written off. A Full and Final Settlement Offer could be a suitable strategy to clear debts if you have access to a lump sum of money - this may be from-

the sale of assets such as property
savings
re-mortgaging
third party donation from family / friends
windfall such as lottery / inheritance

Why might creditors accept?

avoid expenses of trying to recover / legal action that is not guaranteed to be successful
may prefer a smaller overall lump sum now rather than small instalments over a long period
your other options such as bankruptcy may mean no return to them

Some Advantages

if the offer is accepted you pay less overall
the debt would be paid off sooner allowing a 'fresh' start
creditors should mark the debts as a partial settlement
credit rating may improve

Some Disadvantages

no guarantees that the creditor(s) will accept
a lump sum may need to be used which could have been used for something else
once creditors become aware that you have access to a lump sum they may demand payment of the full debt
clearing the debt in this way will not remove any default notice or county court judgment previously obtained from your credit record, they will remain on file for six years
issues around the arrangement being legally binding

Full & Final Settlement Offers should be made by the way of a pro-rata settlement with written evidence / proof from creditors confirming their full acceptance.

Making pro rata settlement offers/ payments would not make the arrangement legally binding. There will be a legally binding agreement if either:

an arrangement is made with all your unsecured creditors; or
the funds are made available by a third party (eg, a relative) and the offer is made by him / her on your behalf; or
the agreement is embodied in a formal document known as a 'deed' The services of a solicitor will be required you want a a deed to be drawn up. (eg, a deed may be required if there are any doubts as to the trustworthiness of any particular creditor)

Useful Links

Further information from National Debtline

What do I do next?

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If you want to explore the other options for dealing with debt you can read about other options