What is full and final settlement?

A debtor can ask their creditor to let them pay a lump-sum instead of the full balance they owe / instalments. The lump sum will be smaller than the amount owed and the creditor "writes-off" the remainder of the debt.

The debtor will need to be given written acceptance of a full and final settlement before the money is paid to the creditor. Usually the debtor requires the creditor to agree in writing that they will provide evidence, for example a letter, to send to credit reference agencies stating the debt has been paid and the date this happened.

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