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Settlement offer to creditors is repaying your creditors with a lump sum of money

Debt settlement involves a lump sum of cash that is used to repay your creditors. The process involves negotiating ‘full and final settlements’ from those you’ve borrowed from.

In a nutshell Making a settlement offer to your lenders using a lump sum of money may come about following an inheritance, from the selling of an asset (such as your home or car) or after receiving a cash gift from your family/friends.

What debt problems is Settlement offer to creditors debt help suitable for?

Borrowers who have received an amount of money to make a reasonable debt settlement offer (such as settling for 75% of the debt owed).

Our debt expert’s opinion on the pros and cons…

Advantages of Settlement offer to creditors

  • Debt settlement can reduce the overall amount that you repay if your creditors agree to your offer.
  • Debt settlement will also involve lower amounts than you’d repay if your financial products ran for the full term (as there will be a refund of interest).

Disadvantages of Settlement offer to creditors

  • Unfortunately, being able to make an offer of debt settlement is reserved solely for those who are fortunate enough to receive a lump sum of cash.
  • There’s always a chance that your creditors won’t accept an offer of debt settlement if it isn’t for the full amount. In this instance you should consider using the money as part of an IVA (if in England, Wales or Northern Ireland), or a Trust Deed (if in Scotland).

Worried about debts that won't go away?


  1. How do I make a settlement offer to my creditors?

  2. You should communicate your full and final settlement offer in writing – either by email or by recorded mail.

    There are many free sample letter templates that you can simply download – such as this one from National Debtline.

    You should insist on receiving confirmation from your creditors that they have accepted your offer prior to sending the money. If a friend or relative is going to be making the payment, you should make this clear to your creditors and ask that they explicitly accept this term as part of your final settlement.

  3. How much should I offer my creditors?

  4. There are no hard and fast rules as to how much you should offer, however most debtors split their pot of money equally between their creditors.

  5. What should I do if some of my creditors refuse my offer?

  6. If the majority of your creditors have agreed to your repayment offer, you should contact those who’ve refused and ask them to look again at your offer. You may want to add more detail to your proposal about your circumstances.

    If multiple creditors refuse your settlement suggestion, consider splitting the lump sum between fewer creditors, and setting up a repayment plan with any remaining creditors.

  7. My creditors have agreed to my full and final settlement, when should I pay?

  8. As soon as possible (any acceptance of a settlement won’t be valid forever). If you can, send the money through a third-party (doing so helps to make the settlement more legally binding).

  9. What do I need to consider for my credit report?

  10. You’ll need to ask your creditor to agree in writing that they will update your credit record with a notification that the debt has been paid, and the date that it was settled. You should check your credit file after you’ve made the payment to ensure that they’ve done this (the account should show as either ‘closed’ or may be marked with a ‘p’ – which stands for ‘partial settlement’).

  11. Should I use my pension to make a full and final settlement?

  12. In April 2015, those aged 55 and over were granted the option of removing money from their pension to service their debts. However, under no circumstances should your creditors pressurise you into doing this, and you should always seek professional debt advice before taking this action.

    Do remember that you may be eligible to pay taxes on the money that you withdraw.

*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

National Debt Help
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