Full and final settlements (F&Fs)
With a full and final settlement, you offer to pay your creditor(s) an amount lower than the outstanding balance as a lump sum, the rest gets written off.
Full and final settlements can be a good alternative to years of low repayments for both you and your creditor(s). You should emphasise this fact when making your offer.
Creditors are more likely to accept your offer if you are only paying tokens or a small amount every month, than if you are making sizable payments.
Debt purchasers pay a fraction of the balance for the account, usually no more than 10%. This means they are much more likely to accept a reduced settlement than the original lender.
Consider offering a lump sum to clear debts you are repaying and/or that are enforceable, rather than debts you are not repaying and/or are unenforceable. See challenging debts.
Start by making a low offer and negotiate up if necessary. 20% may be a good start. If you start too high, you won’t have room for negotiation.
Payment via a third party cheque means a legally binding agreement between the creditor and the third party rather than the debtor, upon the cheque being cashed by the creditor.
Lump sum available x Individual debts
________________________________ = Individual offers
Total amount to repay
For example, if you have £5,000 available to repay the debts listed below, you’d do the calculations as noted.
|Debt1||£2,500||5,000 x 2,500 ÷ 11,000 =||1,135|
|Debt2||£3,500||5,000 x 3,500 ÷ 11,000 =||1,590|
|Debt3||£5,000||5,000 x 5,000 ÷ 11,000 =||2,275|
Pinnel’s Case shows that just because a creditor has ‘accepted’ a partial payment on an outstanding balance, it doesn’t necessarily lose the right to pursue the debtor for the remainder of the balance. However, one exception to the rule is when payment is made via a third party.
In Hirachand Punamchand v Temple  2 KB 330 the Court of Appeal ruled that the part payment was enough to discharge the debt as the payment was made via a third party.
The letter below should be sent recorded delivery to the creditor you wish to make an offer to.