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Debt Settlement Offers

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A debt settlement offer (DSO), also known as a full and final settlement offer, is a way to pay off a debt in one large lump sum.

What is a debt settlement offer?

A debt settlement offer is a debt solution that allows you to repay what you owe with one lump sum payment. This is often also referred to as a full and final settlement offer.

If you find yourself with a financial windfall such as an inheritance or money from a friend or relative, a debt settlement offer could be a viable option to clear your debts. Money from compensation, the sale of an asset, or a pension if you’re over 55 could also be included.

If the lump sum is less than what you owe, you can make a debt settlement offer with the people you owe money to, agreeing to write off any debt left over once you offer the lump sum.

The money is shared equally among all of your debts, or, if you don’t have enough money to cover this, you can opt to settle specific debts.

A debt settlement offer will appear on your credit file as ‘partially settled’ which shows future creditors that the debt you owed wasn’t repaid in full. This will appear on your credit file for six years.

Making a debt settlement offer to multiple creditors

If you owe money to several creditors, it’s possible to pay with one lump sum if they all agree.

By doing this you’d make a pro-rata offer, which involves dividing the lump sum amount between creditors in proportion to what you owe.

The process of arranging a DSO with multiple creditors is much the same as if you’re only paying one, however, you’ll need to work out how much of the lump sum to offer each creditor.

Here’s how it’s worked out:

  • Multiply the lump sum by the exact individual debt owed to one creditor.
  • Divide this by the amount you owe to all creditors
  • The total is the amount to offer to that creditor

For example:

If you have a lump sum of £3,500 and owe £3,200 to a credit card company, £1,000 to your bank and £800 to a pay-day loan company, you should offer:

(3500 x 3200) ÷ 5000 = 2240                        £2,240 to credit card company

(3500 x 1000) ÷ 5000 = 700                          £700 to your bank

(3500 x 800) ÷ 5000 = 560                            £560 to the pay-day loan company

What happens if a debt settlement offer is rejected?

If your application for a DSO is rejected you could try using the money you have acquired to apply for an IVA if you’re a resident of England, Wales or Northern Ireland, or a trust deed if you live in Scotland.

With either of these options, you could agree to clear what you owe using a one-off payment, rather than paying monthly.

Frequently asked questions.

Need more info? Here are a few of our most frequently asked questions on this topic. If you don’t see the answer you’re looking for here, give us a ring – we’d love to help.


This depends on which company you’re making the offer to. Generally, it should be anywhere from 30%-70% of the remaining balance.

If you’re making an offer to several companies, we’d suggest multiplying how much you have by the balanced owed and then dividing it by your overall debt level.

If your offer is rejected, it’s possible to go back to creditors and negotiate. This may take time and a bit of back and forth, but you may find that you can come to a reasonable agreement this way.

Offering the settlement generally won’t have an impact on your credit score. However, if you choose to go with a settlement company, you may be asked to miss payments to the accounts while it’s being arranged, which will have an adverse effect on your score.

Debts will show on your credit report for seven years after the date of settlement. If you don’t pay the full balance, it will be marked as partially settled – which will have a negative impact on your credit score.

If you aren’t clearing your debts in full, this will affect your credit score. As such, this can affect your ability to buy a home. While it isn’t impossible, you will find it difficult to do without taking some time to rebuild your credit score first.