Debt Write Offs

Debt Write Offs are when you, or a money adviser, write to a creditor and request they write a debt off, in full, or in part.

It may surprise you, but Lenders are prepared to consider debt Write Offs, in certain circumstances.

When considering Write Offs, however, it is useful to think of there being two different types.

Full and Final Settlements

The first type is when you want to make a partial payment to a debt in full and final settlement.  The other type is when you request the Creditor writes the debt off in full.

Ask the Lender for a Full and Final Settlement Figure

The first way is to ask the Creditor what they would settle for and, therefore, invite them to give you a settlement figure.

A Firm does not have to give you a settlement figure, but some firms may be prepared to give you a discount if you are proposing to make one payment to clear the debt.

When you approach it this way, how much a discount the lender will give you, will depend on several factors. This may include how old the debt is; whether the creditor you owe the money is the original creditor, or a debt purchaser and, therefore, may have bought the debt themselves. Or, if the debt has proved hard to recover, the lender may be prepared to cut their losses.

Each case will be different, and some lenders may offer little to no discount, especially if they believe they can still recover the debt in full.

Make a Full and Final Settlement Offer to the Lender

Alternatively, another way of making a full and final settlement offer, is to take the funds you have available and divide what you owe with this amount.

So, if your debts are £10,000 and you have £5,000, you could offer each Creditor 50 pence in the pound.

The best way to do this is by telling your lenders who your other Creditors are, and how much you owe them and how much you are offering them.

This shows you are treating everyone fairly.

It can also help sometimes to tell them what the source of the funds is (and for money laundering purposes, they may ask).

If you don’t have the money yet, it will also help to tell them when you will receive it and when you can make the payment.

Many Lenders, if they accept a Full and Final Settlement offer, will expect it to be paid within a certain period and sometimes will only accept an offer, if the sum can be paid within a certain period.

If there are other mitigating circumstances, such as ill health, unemployment etc. it can also help to inform the Lender of this.

The best way to make an offer like this is through an Advice Agency, such as a Citizen Advice Bureau or Local Authority Money Advice Service.

Full Write Offs

Another type of Write Off is where you ask the Lender to write the debt off in full.

This is best done via an Advice Agency, as the Lender will normally want information about your circumstances, your income and expenditure and your ability to pay.

Writing a debt off is not a decision a lender will take lightly, but equally, lenders do agree to write debts off, when someone’s circumstances merit it.

Therefore, if someone is not able to repay their debts and this is not likely to change because they are ill (physically or mentally), retired, long-term unemployed etc. then requesting a debt write off may be an appropriate course of action to take.

When this is done, lenders may request further information, such as a Doctor’s letter. They are also likely to want an income and expenditure completed and returned.

Keeping Records

Whether it’s full Write Offs or Full and Final Settlements, it is important, if you get one, to keep copies of all correspondence and letters between you and the Lender, in case the debt re-appears at a later date and you require evidence it was settled.

Write Offs and Credit Scores

Debt Write Offs can damage your Credit Score, like other debt solutions.

The balance on your credit reference file may show a zero balance, but your account may also show it was only partially settled.

If you have previously missed payments or had a Default Notice, this may also show on your Credit reference File.

This may make it harder to obtain credit in the future.

Readers Questions

  1. Ross

    Hello There

    I lived in Scotland 13 years ago with my wife and family. My wife suddenly left the country, with my kids. I had to follow, or be left alone without my children. I left behind an overdraft on my bank account. I wish to return to Scotland, will I be able to open a bank account again? Any help greatly appreciated
    Kind regards

    1. Scottish Adviser Post author

      Debts are normally written off after 5 years in Scotland, unless the Creditor took you to Court.
      They also fall off your credit report after 6 years.
      I don’t see a problem with you opening a new account on your return.
      Just use a different bank.
      You will require proof of your address and identity, however.

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