Debt Settlement Offers

The common way to pay a debt is in small instalments over an agreed amount of time. However, there are cases when it is in your best interest to pay off your debt or remaining debt in one single instalment. In this case, a DSO or Debt settlement offer may be what you need.

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Why might someone use a Debt settlement offer?

Most common cases for using a Debt settlement offer are those where the individual who has obtained a loan suddenly improves his/ her financial situation due to inheritance, compensation, the sale of an asset or pension and wishes to pay off any remaining debts.

This is not only an opportunity for you to become debt-free but also to renegotiate the amount you have to pay. Your creditors might even agree to write off debt that is bigger than the lump sum you have if you offer them a one-off payment. The amount you will provide can be shared equally amongst all of your debts, or, used to cover a specific loan.

A debt settlement will appear on your credit history as ‘partially settled’ so future creditors will know that the debt wasn’t paid in full. This rating will stay on your credit file for 6 years.

Understanding debt settlement offers

A DSO is an agreement that helps you pay off your debt or the remaining amount of your debt in a single lump sum. Sometimes this agreement is referred to as a full and final settlement offer.

Do you Qualify for a Debt Write Off?

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What happens if you have many debts with different creditors?

You can obtain an agreement from all your creditors to pay one single lump sum. However, this means the whole amount you are going to pay will be divided among the various creditors. The division will be made in proportion to what you owe to each of them or as it is called “pro-rata”.

If you have many creditors you will follow the same procedure for each one of them. However, this will happen after you calculate and decide the amount to offer to each of them.

What is the amount to pay to various creditors?

Calculating the sums to provide each creditor is not complicated. Here is a method that will help you:

  • To begin with, multiply the lump sum by the exact individual debt owed to one creditor.

  • To begin with, multiply the lump sum by the exact individual debt owed to one creditor.

  • To begin with, multiply the lump sum by the exact individual debt owed to one creditor.

There are chances your debt settlement offer might not be accepted. Or it might be accepted by some but not all.

In this case, you might consider using the lump sum to offer to creditors through an Individual Voluntary Arrangement (or IVA). If accepted by 75% in value of those voting in favour it will be legally binding on all your unsecured creditors. Contact us for more details.

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Customers can get free debt advice from the Money Advice Service – an organisation set up by the Government to offer free and impartial advice to those in debt. For more information from the Money Advice Service visit www.moneyadviceservice.org.uk. MAS is part of the Money & Pensions Service. We are not affiliated with MAS in any way.

Become Debt Free is a trading style of Re10 (Finance) Limited Registered Number 04651137.  Data Protection Act Registration Number – Z8613095

Become Debt Free specialise in providing and administering Individual Voluntary Arrangement (“IVA”) solutions to individuals based in England, Wales and Northern Ireland.  We do not administer Debt Management Plans, Debt Relief Orders, or any other debt solutions.  We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meets the criteria for an IVA, therefore, all advice is given in reasonable contemplation of an insolvency appointment.

* To qualify for debt write off in an IVA with us, you must have a minimum of £7,000 of qualifying unsecured debt owed to two or more creditors.  The amount of debt write off is based on your own personal circumstances – typically this could be up to 85% of what you owe; and this has been achieved by over 10% of our customers who have successfully completed their IVA’s in the last 12 months.  The amount of debt write off differs for each customer and is dependent upon their individual financial circumstances and subject to the approval of their creditors.

Andrew Bowers is authorised in the UK to act as Insolvency Practitioner by the Insolvency Practitioners Association.

 

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