I recently read an article which stated the following, in relation
to settling outstanding debt.
If you send one of your creditors a cheque, and write on the reverse
"ACCEPTED IN FULL AND FINAL SETTLEMENT OF ACCOUNT NUMBER (insert)",
and the creditor cashed the cheque, then they are in fact accepting
your cheque as a settlement of the outstanding debt, even if the
cheque is lower than the outstanding amount.
Apart from appearing completely ludicrous, is there any truth in the
above?
Reply
Can you send a cheque for £10 to settle a debt for £4,000 and expect
to clear the debt as the creditor had cashed the cheque (check) you
had written with "ACCEPTED IN FULL AND FINAL SETTLEMENT OF ACCOUNT
NUMBER 12345"?
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No. It would not be 'reasonable' to expect such a small
payment to settle a large balance. Further, the creditor
has never given written or verbal agreement to the
reduction. Should a creditor return your properly due
payment? I think not: I would argue, in court if
necessary, that the debtor owed me money and I was not
about to send it back.
If I were the creditor I would say thank you for your
£10, this now reduces your balance to £3,990. If the
debt was £20, it would be 'reasonable', but the creditor
should/could/would say that they did not look on the
back of the cheque! And, I want the other £10.
If a debtor sent a letter, accompanying the
cheque, saying that the cheque should
only be accepted and cashed in full and final settlement
you do have to look more closely at what the
circumstances are: but silly offers are still silly
offers. A letter from a solicitor would never contain an
unsolicited settlement amount and cheque - they will
ALWAYS get a written, or as a minimum a verbal,
agreement to any reduction: this is the only way to
settle for less than the full debt.
Finally, I have personally been to court (as a creditor)
in this situation between several times in the past 20
years and have always had the courts backing. Trying to
be clever with the law, and its administrators, is not
recommended. Picture a clever debtor being asked by a
judge, "So why did you expect to pay so little, and
expect the creditor to accept so little?" Embarrassing!
