Debt Settlement Sample Letter
Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full.
The process of negotiating with creditors to reduce overall debts in exchange for a lump sum payment is going to be your strategy. A successful settlement occurs when the creditor agrees to forgive a percentage of total account balance. Normally, only unsecured debts not secured by real assets like homes or autos can be settled. Unsecured debts include medical bills and credit card debts — not student loans, auto loans or mortgages. For the debtor, this makes obvious sense, they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes by more than 50%, their debt balances. Whereas, for the creditor, they regain trust that the borrower intends to pay back what he can of the loans and not file bankruptcy (in which case, the creditor risks losing all monies owed).
Negotiating with a collection agency or junk debt buyer is somewhat similar to negotiating with a credit card company or other original creditor. However, many collection agencies (junk debt buyers) will agree to take less of the owed amount than the original creditor, because the junk debt buyer has purchased the debt for a fraction of the original balance. As a part of the settlement, the consumer can request that collection is removed from the credit report, which is generally not the case with the original creditor. Even if the removal of the collection account from the consumer credit report has been successfully achieved as a condition of settlement during negotiations, the negative marks from the original credit card company will still remain.
Your Street Address
Your City, State ZIP Code
Their Street Address
Their City, State ZIP Code
Dear Collection Representative,
I really appreciate your company’s willingness to amicably work out a settlement on my account. Currently, I’m short of funds due to (Give explanations why have you defaulted on payments, job loss, illness, etc.) and unable to pay the amount you have proposed.
So I would like to propose a counter offer. I would like to offer an amount of to settle the outstanding debt amount of with you. I would also like to request you to include the following conditions as a part of my settlement offer:
1. My account will be showing as ‘paid in full’ with no future liability or involvement.
2. Any lawsuit filed against me will be immediately dismissed and no future litigation will be made on the said account.
3. All the negative information related to the account will be removed from the credit bureaus’ reports.
I have several other delinquent accounts and I will only be able to pay the creditors who will accept a settlement amount I can afford. I hereby enclose a copy of my financial credentials for your consideration.
If you are in a position to accept my settlement offer, then please sign the debt settlement agreement enclosed herewith and return a copy of the agreement to me. As soon as I receive the signed agreement, I will send the proposed amount through money order.