Debt Forgiveness Letter Templates and Samples

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What Is a Debt Forgiveness Letter?

A Debt Forgiveness Letter is a document that can be used when a creditor wants to inform their debtor that their debt has been canceled. The purpose of the letter is to notify the debtor that they no longer need to pay back the money they have borrowed.

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A creditor can come to the fact that they need to use a Forgiveness of Debt Letter in different situations. For example, if they have decided it will cost more to post the debt to a collection agency and it is just easier to cancel the debt. Additionally, they can have a positive advantage from designating the canceled debt as a loss on their tax return. 

"Debt Forgiveness Letter Template"

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Not all debt or arrears can be canceled this way, so before writing the letter an individual should check the state’s applicable law to see if their state has implemented Debt Compromise Policies, what kind of debt can be canceled, and if there are any restrictions on the subject. For example, in some states, a Child Support Debt Forgiveness Letter can be used to discharge a parent’s arrear in child support, while in other states it is not applicable.

How to Write a Debt Forgiveness Letter?

If the creditor has decided to cancel a debt, they should write a letter to their debtor informing them about their decision. A common debt forgiveness letter template can contain several parts which include the following:

  1. Information About the Creditor. In the first part of the document, the creditor should designate their name, postal address, and telephone number. This information can be used in case the debtor will need to contact the creditor on the subject of the letter.
  2. Information About the Debtor. Here the creditor should state who they are addressing. They can state the name of the debtor and their postal address, for identification purposes.
  3. Debt Information. The letter should provide information about the debt itself and should explain where the debt comes from, how much is owed in total, how much has been paid so far, and how much is left to pay.
  4. The Subject. Creditors can use this part to express the subject of the document, i.e. they should declare that the debt is canceled and the debtor does not have to pay the rest of it back. In addition to this, the creditor can state what helped them to make this decision. For example, they can designate that the decision has been made due to many years of beneficial collaboration, or because the debtor has been their life-long customer, etc. 
  5. Conclusion. In the end, the creditor should express their hope that the debt forgiveness will help both parties to overcome the occurred difficulties and that they will be able to work together in the future.
  6. Signature and Date. To state their own free will and verify everything designated in the letter the creditor should sign and date it.

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Sample "Debt Forgiveness Letter"

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Size: 65 KB
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Debt Letter Template Letters

"Debt Forgiveness Letter Template"

Rate (4.3 / 5) 22 votes
Size: 59 KB
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Debt Letter Template Letters

Sample "Child Support Debt Forgiveness Letter"

Rate (4.3 / 5) 7 votes
Size: 69 KB
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Debt Letter Template Letters