Free Debt Settlement Letter Templates

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debt settlement letter


If you are unable to pay back a large amount of debt, you’re not alone. Sometimes the best way forward is not to ignore your debt, but to negotiate with your creditors. By negotiating with them, you can have part or all of your debt forgiven. To do this, you usually send them a debt settlement letter.

A debt settlement letter is used to come to an agreement with your lenders on how much you are able to pay and how much they can forgive. These letters usually explain why you are unable to pay your debts and that you are willing to work with them.

Showing the willingness and ability to work with your debtors can go a long way! Instead of panicking and ignoring phone calls from debt collectors, using debt settlement letters can really help you negotiate new terms.

Validate your debts before sending a letter

First and foremost, if you aren’t dealing with a collection agency, you need to make sure that you actually owe this debt.

In some cases, collection agencies have mistakenly gone after people that don’t owe any money. When a debt collector agent reaches out to you, request that they send you a letter validating that the debts they are claiming are indeed yours.

According to the Fair Debt Collection Practices Act (FDCPA), they have five days to do so after your request. If you receive that letter and you believe that you actually don’t owe that debt, you have 30 days to dispute it. Just something to keep in mind.

Important things to include in a debt settlement proposal letter

When you write and send a final debt settlement proposal letter, it’s important that you do it right the first time. If done incorrectly, it might cause delays and even penalties depending on your situation.

Your debt settlement proposal letter should be rich in explaining how you are planning on settling a debt, how much you offering to pay, and when you are expecting to pay it off.

Your intentions must be clear and concise. If your letter is long or confusing, the agent on the other end simply discarded without working with you. Important to me their job as easy as possible, so you can have the best outcome.

Some things that you need to make sure that you including the letter are:

  • Your full first and last name
  • Your current address
  • Account numbers or reference numbers they can use to look up your account

Advantages of writing a debt settlement letter

Sending out a debt settlement letter can prove to be financially beneficial if you are experiencing Financial hardships. Sometimes people simply just cannot afford to pay off some of their debts.

Although settling a debt is not guaranteed, it can definitely give you financial peace of mind if it works out. Settling around 50 to 80% off the original debt it’s much better than paying 100% of it.

Disadvantages of writing a debt settlement letter

As mentioned above, sending a debt settlement letter does not guarantee that to your debt will be settled. Its simply an option out there that you can try out.

Settled debts can also have a negative effect on your credit score. Settling a debt can show other lenders that you were unable to pay back a loan at some point. This might cause other lenders to see you as unreliable and deny you future credit.

Debt Settlement Letters

Below are downloadable settlement offer letters that you can use. Simply open the templates in Word and fill in the blanks to suit your needs.

1. Debt Settlement Offer Letter

Use this template to make your initial offer. It includes language that helps you negotiate new terms and explains your financial situation.

debt settlement letter

2. Debt Settlement Counteroffer Letter

Use this template to counter offer any offers that you receive from your creditor. If the amount they requested is still too high, then the idea is to use this template to lower it further.

debt settlement letter
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