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‘How a negotiated settlement can help you in the long run’

Those who are currently in the unfortunate position of grappling with unmanageable debts will most likely have been presented with the following decision: Either I file for bankruptcy, or I attempt a negotiated settlement. Both options are solutions to the same problem, both come with pros and cons, and both are to be considered relative to your specific financial circumstances. Whilst bankruptcy can be an infamously constraining process and one which can turn into a life-long financial itch, a negotiated settlement - if negotiated properly - can serve as an expedient and liberating route out of debt.

The aim of a negotiated settlement is to reduce the amount of overall debt owed to a creditor in exchange for a lump sum payment. The reality is that many creditors would prefer to receive a lump sum payment from the debtor even at a reduced price if it means that the debtor avoids filing for bankruptcy. A successful settlement would involve the creditor agreeing to forgive a percentage of the total debt owed. A negotiated settlement provides not only an alternative to bankruptcy - along with the court rulings which accompany this decision - it can also reduce the amount of debt you owe to the creditors, potentially by a percentage of up 50-70%.

That said, opportunities such as this come with strings attached. If you think that a negotiated settlement might be the right solution for you, it is important to bear three things in mind:

  1. A negotiated settlement requires the debtor to make a lump sum payment.

  1. Evidence of a negotiated settlement stays on your credit report for seven years after its original delinquency date. Although this may impact your ability to make new loans, it is still a preferable sanction in comparison to the restrictions involved in bankruptcy.

  1. The reduced sum agreed upon through the settlement may still be taxable. That is, if your settlement involves you paying a debt of £10,000 for the reduced sum of £7,500, the forgiven £2,500 may be classed as taxable income.

A negotiated settlement is a viable solution to insolvency and a viable alternative to bankruptcy. It can mean a fresh financial start free from creditors. At Silver Insolvency Solutions, we offer support and guidance throughout the process of negotiated settlements. If you believe that a negotiated settlement might be the right solution to your current situation, please get in touch.



Telephone: 0303 961 7169

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