Debt Settlement Offer Letter Template

Debt Settlement Offer Letter Template

A Debt Settlement Offer Letter is a formal document prepared by a debtor and sent to a creditor with the suggestion to pay back a portion of an outstanding debt. This statement should explain why you cannot pay back the entire sum of money you owe whether it is a lump-sum payment or you have an agreement to pay in installments.

Alternate Name:

  • Debt Settlement Proposal Letter.

If you want to get rid of negative items on your credit report and possibly take out another loan or obtain a credit card from a different financial institution, first of all, you must handle the debt you currently owe, so a written proposal to the creditor who may agree to forgive your debt can be the first step you take when dealing with the difficult financial situation. You can download a Debt Settlement Letter template through the link below.


How to Write a Debt Settlement Offer Letter?

Follow these steps to draft a Debt Settlement Proposal Letter:

  1. State the name of the creditor or financial institution you owe money to.
  2. Introduce yourself and refer to the agreement you have signed with the letter recipient or your account to facilitate identification.
  3. Confirm you are aware of the debt you owe and offer the creditor to settle it for a reduced amount. Depending on your current financial standing and the sum of debt, you can propose to pay a lump sum in exchange for the debt forgiveness or offer smaller installments than the ones you have to pay every month now.
  4. List the reasons that do not allow you to pay the full debt. You may refer to your illness or injury, a health issue of one of your family members, the death of the main breadwinner in your household, unemployment, or natural disasters that complicated your life and led to financial hardship. Note that your claims must be supported by evidence so do not forget to attach the documentation that proves your words.
  5. Directly communicate your wishes. Your target is to settle the debt for a certain sum of money and request the creditor to report the account as paid especially if you have encountered difficulties obtaining a loan or credit card from another creditor due to poor credit history.
  6. Add your contact information and ask the letter reader to reach out to you to discuss the matter in further detail. Sign and date the document. You may send it via traditional mail or e-mail; however, consider using certified mail if you have had extensive correspondence with the bank in question and you believe you may have legal disputes with them in the future.

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