Discover A Formula For A Full And Final Debt Settlement Offer To Get Debt Free
With the plethora of loans that an individual or a household may have, a full and final debt settlement can mean many things and have different advantages. A full and final settlement is offering to pay the creditor a lump sum which is less than the amount owing. For instance, if the balance owed is five thousand dollars an offer is made to pay a portion of this amount in return for the balance being written off by the creditor.
Being paid a definite lump sum of money immediately rather than possibly getting smaller amounts over a long period of time is an advantage to the creditors. Therefore, they are willing to write off a portion of the debt to get most of the money now instead of at some future date.
Of course it stands to reason that the debtor has to have access to the funds required to make the payment if the creditor accepts the offer. A refund from the taxation office, an unexpected inheritance from a family member or a gift from friends or family can be the source of the funds.
If there is more than one creditor involved, then it is prudent to make the offer to all the creditors at the same time. The offer should also be on a pro-rata basis in relation to the debt. The reason for this is that when they see that they are all receiving a similar offer, they are more likely to accept.
The offer should be calculated using a specific formula, based on the total debt, the funds available and the balance of each individual creditor. Assume that there are five creditors who are owed ten thousand dollars in total with each creditor’s balance being two thousand dollars. If the total funds available to the debtor is five thousand dollars, then each creditor would be offered one thousand dollars as a full and final settlement. This amount is calculated by using the formula: the total funds available of five thousand dollars, multiplied by each creditor’s balance amount owing of two thousand dollars, and dividing by the total debt amount of all creditors which is ten thousand dollars.
There are other factors to remember when making an offer to creditors. Set up a table showing the total lump sum available, the balance owning to each creditor and the split of the offer being made to each of them.
A letter should be sent to all creditors showing the details such as the balance of the debt, the full and final offer amount and the date by which the payment will be made once the offer is accepted. A copy of the table showing all debtors and the offer amounts should be included.
It is important to make sure that the creditor accepts the offer in writing, including noting that the full balance has been paid in your credit reference file, if applicable. The money should only be paid once the written acceptance of the offer is received.
The fact that the creditors are receiving a portion of the debt as a lump sum in the near future and not having to wait for months or years to receive payment in smaller instalments is an attractive proposition for them. By making a full and final debt settlement offer the debtor can be free of debt sooner.
Get exclusive inside information on how to make a full and final debt settlement offer to creditors now in our guide to DIY Debt Settlement .
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