Negotiated Settlement

This is also known as a full and final settlement.

Here a lump sum is used to part pay the debt and the creditor agrees that the debt is settled and will ammend the credit files accordingly.

So Debt is written off at less than the original value of the debt.

Advantages

• Majority of debt can be written off in most cases


• A one off payment is used instead of a long term arrangememt


• Implementation time 6-18 months depending on the profile of debt (ratio of credit cards/loans and the lending institutions have different settlement criteria)


• Each creditor is settled individually thus there is no majority vote veto.


• Does not involve officials or the courts


• Debts can be paid off ad-hoc (singularly)

Disadvantages

• A lump sum is required (not everyone has access or the ability to raise a lump sum).


• If a debt management plan is not in place settlements are harder to achieve.


• Creditors will settle at different amounts some may hold out for more money.