Debt Settlement Calculator: Full and Final Offer Letter (UK and US 2026)

Debt Settlement Calculator: What Would a Full and Final Offer Look Like? (UK and US)

Written by Hamid Ali, MSc Accounting & Finance, Founder of DebtShift · Updated 3 November 2026 · Rules checked against IRS Topic 431, Debt Camel and the FCA/FTC guidance on that date

You have £1,500 saved from a tax refund, a £5,000 card balance you cannot keep up with, and one question: would they take it? Not “would they take less”, but what they would say if you wrote the letter tomorrow.

The honest answer is that nobody can promise a number. What the calculator below does is show your offer as a share of the balance, how much would be written off, the tax and credit file points for your country, and a letter you can edit. The rest of this page covers what actually makes a creditor say yes, because that is where most offers are won or lost.

On this page: the calculator · what makes a creditor say yes · why offers get rejected · making the offer · UK tax and credit · US tax and rules · questions

The calculator

Pick UK or US, enter the balance, and add the lump sum you could really pay. Leave the lump sum blank to see example offers at 25%, 40%, 50% and 75% (these are arithmetic, not predictions).

\u2713 Free to use. No account, no sign-up and no bank link. You only give an email if you choose to have your result sent to you.

What makes a creditor say yes

Think about it from their side. A bank or debt buyer is comparing your offer with what it expects to collect if it waits. The things that tip it are mostly practical:

Why offers get rejected, and what to try instead

Most rejections come down to one of four things: the creditor believes you can pay more each month, the offer arrives too early, the amount is too low for how long the debt has been running, or it is not clear where the money comes from. Enclose an income and expenditure statement with every offer, mention any priority debts (rent, council tax, energy) that you must pay first, and explain the source of the cash.

Two rules save people real money. First, never borrow to fund a settlement. A new loan after a default usually costs more than the old interest, and repaying a defaulted debt will not repair your credit score. Second, an offer to one or two creditors at a higher percentage often works better than tiny offers to all of them.

Before you offer, ask whether there is a stronger route. If the debt was unaffordable when it was lent, an affordability complaint may remove the default. If it is a card, loan or catalogue debt, you can ask for a copy of the credit agreement (a Section 78 request under the Consumer Credit Act), which a debt buyer may struggle to produce. If you are on a fixed or low income with no chance of paying, a write-off request or a Debt Relief Order may beat a settlement. If the debt is old, check the dates with the statute barred checker, because paying can restart the clock.

Making the offer, step by step

1. Get free advice first (StepChange 0800 138 1111 or National Debtline 0808 808 4000 in the UK, an NFCC member agency in the US).
2. Check that the debt is yours, who owns it now, and whether it is time-barred.
3. Work out the most you can pay in one go without missing rent, bills or food.
4. Write to the creditor with an income and expenditure statement. Say where the money comes from and that it is only available if they accept.
5. Ask them to confirm in writing, before you pay, that the payment is in full and final settlement, the rest is written off and the balance will not be sold on.
6. Pay by bank transfer with a reference, not cash. Keep every letter and email for at least six years.
7. Check your credit file a month or two later to see it recorded as settled.

UK: tax, credit file and the rules

For individuals, a settled or written-off personal debt generally has no direct income tax consequence in the UK. Business debts can be different, so ask an accountant if the debt belongs to a business. A defaulted account is usually marked as settled but stays on your credit file for six years from the default date, not the settlement date. Because the clock is tied to the default date, settling late does not extend how long it shows.

US: tax, credit report and settlement companies

The IRS says that if a debt is forgiven or discharged for less than the full amount, the cancelled amount is generally taxable, and you report it for the year the cancellation occurred (IRS Topic 431). The creditor may send a Form 1099-C, usually when $600 or more is cancelled, but your duty to report taxable cancelled debt applies even if the form never arrives or is wrong. There are exclusions. Debt cancelled in a Title 11 bankruptcy case is excluded. So is debt cancelled to the extent you were insolvent, meaning your liabilities exceeded the fair market value of your assets just before the cancellation. You report an exclusion on Form 982, and it can reduce certain tax attributes, so check it with a tax professional.

Debt settlement companies are a separate matter. The FTC’s rules ban them from charging a fee before they have settled at least one of your debts, and many tell you to stop paying your creditors, which can bring late fees, collection calls and lawsuits. A nonprofit NFCC member agency is a safer first call. Each state also sets its own statute of limitations, and in some states a small payment or written acknowledgement can restart it, so check before you send money.

Worked examples

• UK. £5,000 credit card balance, £1,500 offered: £1,500 ÷ £5,000 = 30%, so £3,500 would be written off if accepted. If the card went into default on 1 March 2024, the default would still drop from the credit file in March 2030 whether or not it was settled.
• US, taxable. $6,500 debt settled for $3,000: $3,500 cancelled. That is above $600, so expect a Form 1099-C.
• US, insolvent. Same $3,500 cancelled, but your debts were $30,000 and your assets were worth $9,000 just before. You were insolvent by $21,000, more than the $3,500, so the full amount can be excluded on Form 982.

Related tools

See how much interest got you here with the Minimum Payment Trap Calculator, check your options with the Bankruptcy and DRO Checker, and test old debts with the Statute Barred Checker.

Questions people ask at 2am

What percentage will a creditor actually accept?

Nobody publishes a reliable figure, and anyone quoting one is guessing. What moves the answer is who owns the debt, how long it has been in default, how long full repayment would take you, and whether the money looks like a one-off. Debt Camel’s advice is that a debt buyer is much more likely to accept a low offer than the original lender. Start with a number you can really afford and never borrow to fund an offer.

Will a settled debt hurt my credit score more than an unpaid one?

Paying a defaulted debt does not repair your credit score. In the UK the default stays for six years from the default date whether you settle it or not, and the record is usually marked as settled. The benefit is practical: it stops a court claim and may help with future lenders. In the US, negative items generally stay up to seven years from the first missed payment.

Do I pay tax on a settled debt?

UK: for individuals a settled personal debt generally has no direct income tax effect, though business debts can differ. US: cancelled debt is taxable income unless an exception or exclusion applies, such as insolvency or a bankruptcy discharge (IRS Topic 431). A creditor that cancels $600 or more usually sends Form 1099-C, but you must report taxable cancelled debt even if no form arrives.

Should I stop paying so they will accept a settlement?

Please do not do it just to create leverage. Missed payments bring fees, default marks and possibly a court claim. If you are already behind, a free adviser can set up a plan or token payments, and you can come back to a settlement later. Read what happens if you stop paying first.

Do I need a debt settlement company?

No. Everything a settlement company does for a fee, you can do yourself for free, or with a charity. In the UK use StepChange or National Debtline. In the US, the FTC rule bars debt settlement firms from charging a fee before they have settled at least one debt for you. Be careful with any firm that tells you to stop paying your creditors.

What if I cannot find the full lump sum after they accept?

Do not agree to an amount you cannot pay. Check the written terms. If you miss the payment date the creditor may withdraw the offer and ask for the full balance. Ask for a few extra days in writing before the deadline rather than going silent.

Sources and when we checked them

• IRS Topic no. 431: Canceled debt, is it taxable or not?, viewed 3 November 2026.
• Debt Camel: What to do if a full and final settlement offer is rejected, viewed 3 November 2026.
• StepChange and National Debtline guidance on full and final settlement offers.
• FTC Telemarketing Sales Rule (debt relief services advance-fee ban).
• Percentages in the calculator are arithmetic examples, not data. The calculator assumes one lump sum on one debt and ignores interest added while you negotiate.

More help: UK debt help guide · US debt relief guide.