What is a Full and Final Settlement of Debt?
When debt problems spiral out of control, the costs involved i terms of interest payments and charges can quickly mount up, and in extreme cases you can end up owing at least as much in these costs as you originally borrowed. This is especially true of credit cards, where making the minimum repayments means that nearly all of your money goes towards servicing your debt costs without actually reducing what you owe. Problem debts can easily become a treadmill of demand letters, missed payments, and stress. This situation benefits neither the debtor nor the creditor, and if you sincerely can’t pay what you owe, then many creditors will agree to write off some of your debt under an arrangement known as a ‘full and final settlement’. Even though you won’t be fully clearing what you owe, creditors will usually take the pragmatic view that receiving some amount of a problem debt is better than receiving nothing, which might very well happen if bankruptcy becomes necessary. The most usual scen
