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17.04.2018

What happens if my Debt Settlement Offer is refused?

Using a Debt Settlement Offer (DSO) as a debt solution can be fairly rare as few people are lucky enough to come across a lump sum that they can offer to their creditors. If you are lucky enough to be able to make an offer, it can be pretty disheartening to have that offer rejected. But, don’t worry, this doesn’t mean you have no further options. You may even still be able to enter into a different DSO, if you are willing to change your proposal.

Why was I refused?

You may have been refused by all your creditors, or by only a few of them. Either way, it is worth looking at why you were refused before you give up!

  1. They think you can afford your monthly payments
    Solution: Your letter didn’t have enough financial information, so send another which further explains your financial situation.

The offer letter is very important, it has to be formal, but also convincing. It can be quite easy to leave out an important bit of information about your situation that can help persuade them that you cannot afford your monthly payments. It can be a good idea to include a comprehensive breakdown of your monthly income and expenditure. Demonstrate how little surplus income you have to put towards your debts. Be honest if you have any assets, as your creditors may have found out about them anyway, which might be why your offer was rejected in the first place. If you have equity in your home – why can’t you remortgage it? What about your car – is it essential for your job?

  1. They think your situation could still improve
    Solution:
    If you can, wait until you can prove that your situation will not improve.
    If you have only just lost your job, or you haven’t missed any payments yet then they may think that you may soon have a change in circumstance and be able to pay your monthly payments. Generally, a DSO is a solution for people who can prove that they cannot pay their debt because they have little or no surplus income each month and, therefore, regularly miss payments. If you think you are one of those people, it is only a matter of time before your finances will speak for themselves and you can send a second letter asking them to consider you once again.
  2. You aren’t offering them enough money

Solution: Offer a larger offer to only some of your creditors.

There are a lot of factors that creditors may consider when they assess the amount of money you are offering them. They might consider how much money you have already paid into the account, they might assess their own finances, or maybe they have a strict company policy with a minimum that they can accept. No matter why they want more money, you can offer them more money, using the same lump-sum, by reducing the number of creditors you are trying to settle with. For example, instead of offering £5000 shared between 4 creditors, you can offer £5000 shared between 3. You will still be liable for the fourth creditor, but 1 monthly payment, particularly if you make sure to choose one of the smaller payments, is much more manageable than 4.

Other Debt Solutions

If the above solutions aren’t going to work for you, then there are plenty of other debt solutions that could help you. Several, like the IVA and the Trust Deed, are legally binding on all of your creditors. Some of these solutions may have more benefits than a DSO, so doing plenty of research is always worthwhile!