How to make a full and final settlement offer

Applies to: UK-wide

Before you write

1. Confirm who owns the debt. Debts are often sold. Offer to the current owner, not the original lender, unless they still own it.
2. Confirm the balance. Ask for a statement. For an old consumer credit debt you can ask for a copy of the agreement — CCA request.
3. Check the time limit. In England, Wales and Northern Ireland most debts become statute-barred after six years without payment or written acknowledgment; in Scotland, after five years the debt usually prescribes. A payment or written admission before then can restart the clock. Statute-barred debt.
4. Decide the amount. Start from the lump sum you genuinely have. How much to offer.

What the offer letter says

• Your name and account reference.
• That you are offering a set sum “in full and final settlement” of the account.
• Why you cannot pay the full balance, with a short budget.
• Where the money comes from — for example a one-off gift from family.
• That payment will follow only after written acceptance.
• That you ask for the account to be closed with nothing further owed and marked settled, or partially settled, on your credit file.

Many people head the letter “without prejudice” to signal it is a negotiating offer. If you have several creditors, offer each the same share of the money in proportion to their balance and say so.

Handling replies

• Accepted — check the letter states the sum, that it settles the account in full, and that nothing more will be pursued.
• Counter-offer — you can accept, explain again why you cannot pay more, or wait. Never stretch beyond what you have.
• Refused — ask what they would accept, or try again later. Some creditors accept a second offer.

Paying safely

• Pay only after written acceptance, by a method that leaves a record.
• Do not give card details that allow further payments.
• Keep the acceptance letter and proof of payment permanently. If the remaining balance is ever sold on or chased, they are your evidence.
• Check your credit file a couple of months later and raise any errors.

Risks to weigh

The creditor does not have to accept. A settled-for-less account is usually marked partially settled. Using money you need for priority bills can cause bigger problems. If you might later need a formal solution such as a DRO or bankruptcy, paying one creditor in preference to others can be looked at, so take free advice first if you have several debts.

This page explains how the solution works. It is not a recommendation, and it cannot tell you whether it suits you — a free, regulated debt adviser can look at your full situation.

Common questions

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