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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 (DSO)?

A debt settlement offer is a debt solution that allows you to repay what you owe with a 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, using the lump sum to make a debt settlement offer could be a viable way to clear your debts.

Money from compensation, the sale of an asset, or a pension if you’re over 55 could also be included.

By making a DSO, you’re offering your creditors the chance to recoup a portion of what you owe upfront, rather than waiting for you repay the amount you owe over an extended period of time, using monthly payments for example.

This is particularly useful if it’s unlikely you will ever be able to repay the total amount you owe.

How does a DSO work?

When you’re in debt to multiple creditors, whether it’s your loan company, credit card company, or another third party, the ideal scenario is to repay the total amount you owe and become entirely debt free.

When that’s not possible, the next best thing is a partial settlement of your debt.

A DSO allows you to use a lump sum to clear your debts, even if the lump sum payment is less than your total debt. As long as your creditors accept your offer – i.e. agree to sum of money in the settlement offer – they will accept partial settlement of your debt in exchange for writing off the remaining amount you owe.

If the settlement offer is big enough, the money will be shared equally among all of your creditors. If there isn’t enough money involved to cover this, you can use the lump sum to settle specific debts.

Can I negotiate a debt settlement myself?

There is no rule in place to say you have to appoint someone to deal with your creditors and negotiate a full and final settlement on your behalf.

If you have access to a lump sum, it is possible for you to reach out to your creditors and negotiate a debt settlement directly.

If your debt owed relates to credit cards, for example, credit card companies are obliged to deal with you, and there is no guarantee that industry experts or professional debt negotiators will be able to get a better deal than you.

That said, there are debt charities and debt advice companies who may be able to help.

Even if you’d prefer to handle your debt settlement offer yourself, it’s a good idea to at least seek debt advice before offering creditors a sum of money.

What is a reasonable full and final settlement offer?

If you come into a lump sum and are interested in using that money to make a debt settlement offer, you will first have to work out how much money to offer.

Ultimately, a ‘reasonable’ amount to offer as a full and final settlement is whatever your creditors are willing to accept.

How much that is depends on various factors, including who your creditors are, how big the lump sum is, and your chances of being able to pay off the full amount over time.

You won’t be able to offer the full amount in your settlement, but you should offer as close to the full amount as you can afford.

By agreeing to a settlement offer, your creditors are accepting a loss on your debts- the closer the offer is to the total amount you owe, the more likely each creditor will be to accept your offer.

What percentage should I offer to settle debt 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.

Does a DSO harm you credit score?

A debt settlement offer is similar to most debt solutions in that it will remain on your credit file and impact your credit score.

The reason for this is that you will be agreeing to a partial settlement, rather than fully clearing your debts.

A debt settlement offer will appear on your credit file as your debt being ‘partially settled’. This may seem strange given your creditors have accepted the sum of money offered, and agreed to wipe clean the rest of what you owe them.

Unfortunately, creditors agreeing to write off your debts is not the same as repaying them in full. While using a DSO means you will no longer be on the hook for the debts covered by the agreement, future lenders will be able to access your information and see that the debt you owed wasn’t repaid in full. This will appear on your credit file for six years.

Should I pay a debt settlement offer?

As with every solution, a debt settlement offer comes with pros and cons. On the plus side, using a lump sum to make a debt settlement means you will no longer be responsible for the debts included in the agreement, and you won’t be beholden to your creditors.

On the other hand, a debt settlement isn’t viewed in the same way as repaying your debts in full, and will therefore have an impact on your credit score.

If you’re struggling with your debts and are wondering whether a debt settlement offer is the right debt solution for you, talk to Creditfix. Our advisers will never rush you into a decision – they’ll listen to you, gauge your situation, and give you the debt advice you need to take the next step.

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.