Full & Final Settlement
Settle your debts with a one-off lump sum payment for less than you owe.
What Is a Full & Final Settlement?
A Full and Final Settlement is an informal arrangement where you offer your creditors a one-off lump sum payment to clear your debt. If the creditor accepts, you pay the agreed amount and the remaining balance is written off.
This is typically used when you have access to a lump sum - perhaps from savings, a redundancy payment, an inheritance, or a gift from family or friends.
How Does It Work?
- 1Assess your total debts and determine how much lump sum you have available
- 2Calculate a realistic offer (typically 25-60% of each debt)
- 3Write to each creditor with a formal settlement offer
- 4Explain your financial circumstances and why this is the best outcome for them
- 5If the creditor agrees, pay the lump sum and get written confirmation
- 6The remaining balance on that debt is written off
Lump Sum Settlement Calculator
* These figures are for illustrative purposes only. Creditors are not obliged to accept settlement offers. Typical settlements range from 25-60% of the total debt.
Important: Creditors are under no obligation to accept a settlement offer. If they refuse, you still owe the full amount. Always get acceptance in writing before making payment.
Advantages
- Clear debts quickly - often within weeks
- Significant savings compared to full repayment
- No ongoing monthly payments
- Not a formal insolvency solution
- Fresh start without long-term commitment
Things to Consider
- You need access to a lump sum upfront
- Creditors may reject your offer
- Not legally binding until accepted in writing
- Settled debts may show on your credit file
- May need to negotiate with each creditor separately
Full & Final Settlement vs IVA
| Feature | Full & Final Settlement | IVA |
|---|---|---|
| Payment type | One-off lump sum | Monthly payments over 5-6 years |
| Debt reduction | Varies (typically 40-75% off) | Up to 85% written off |
| Legal protection | None - informal | Legally binding on all creditors |
| Timeline | Can be settled in weeks | 5-6 years |
| Creditor agreement | Each creditor decides | 75% must agree, binds all |
| Lump sum needed | Yes | No |
Not Sure Which Option Is Right?
Speak to a qualified advisor to compare Full & Final Settlement with an IVA for your situation.
* This information is for general guidance only and does not constitute financial advice.