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Full and final settlement offer letter

The letter that turns a lump sum into a closed account — on terms fixed in writing before the money moves.

Written by The My Debt Cleared editorial teamLast reviewed 30 August 2026Jurisdiction United KingdomEditorial policy
A full and final settlement letter offers a specific lump sum to close an account for less than the balance, sets the conditions — written acceptance, balance written off, no future pursuit, the credit-file marker agreed — and makes payment conditional on all of them. The order matters absolutely: acceptance in writing first, payment second, never the reverse.

When to use this

When a one-off sum exists — typically from family — that could close a debt you cannot otherwise clear. It works best on older debts, sold debts and accounts already in default. How much to offer explains the logic creditors apply; this letter puts the offer in the form they expect.

The letter

Your name
Your address
[Date]

[Creditor / debt purchaser name and address]

Account/reference: [number]
Current balance claimed: £[balance]

Dear Sir or Madam,

I am writing to offer £[amount] in full and final settlement of the above account.

This sum is being made available by [a family member / third party] on condition that it settles the account in full. It is not money I could otherwise pay towards the debt: my enclosed income and expenditure budget shows that my available surplus is £[surplus] per month, from which [number] creditors are being paid pro rata. [Delete if not applicable: I am making comparable offers to my other creditors from the same source of funds.]

I ask you to accept this offer on the following terms, confirmed in writing before payment is made:

1. that the payment of £[amount] is accepted in full and final settlement of the account;
2. that the remaining balance is written off and no further pursuit of it, by you or any assignee, will take place;
3. that the account will be recorded with the credit reference agencies as settled [or: as partially settled, and I ask you to consider recording it as settled as a term of this agreement].

On receipt of your written acceptance on these terms, payment will be made within [14] days by [method].

Yours faithfully,
[Name]
Enc: income and expenditure budget

Before you send it

Term 3 is the one people forget and regret: a settlement is normally recorded as partially settled, and you can only negotiate the marker before paying. Do not pay on a phone call; get the acceptance on paper, keep it forever, and pay by a traceable method. If a collector later pursues a settled balance, the acceptance letter ends the conversation. Inside a live IVA, use the variation route instead — this letter is for debts outside any formal arrangement.

Keep a copy of everything you send, send by a method you can evidence, and if your situation involves court deadlines or enforcement, free debt advice before posting anything is the better order of events.

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