Use these free letter samples as templates for your formal notification.
There are many reasons why consumers get deeper and deeper into debt, and some of the reasons are out of the consumer’s control. They may have unexpected medical expenses, home repairs, or other emergencies where they had no choice but to go into debt to pay.
When they become overwhelmed with without the income to repay, they may ask their creditors for help. A debt settlement letter is the first step towards contacting creditors to ask for a reduction or elimination of certain debt.
The most common hardships that qualify are:
• Loss of job
• Reduction of income
• Failed business
• Death in the family
• Military duty
• Property damage from fire or weather
Consumers can ask their creditors to remove negative debt from their credit report. According to the law, creditors have a choice of what debt they report. If the consumer is in difficult circumstances, the creditor can remove negative debt from their credit report.
The consumer should be honest with the creditor and explain that they have considered bankruptcy, but would rather avoid it. The creditor should believe that the debtor wants to repay their debt, but is having difficulty.
The consumer can request that they repay a reduced amount. The creditor will lose everything if the consumer files for bankruptcy, so they may be willing to help in order to recover at least part of the debt.
The consumer needs to decide exactly how much he or she can afford to pay each month, and make that offer to the creditor. A letter of agreement can be enclosed that the creditor is asked to sign if they agree to reduce the amount of debt and accept monthly payments on the balance.
This letter is very important for the consumer because it is proof that the creditor was willing to negotiate the debt in the event the creditor decides to ask for the whole debt repayment in the future.
The consumer can ask the creditor to inform the credit bureaus that the debt is settled, or they can ask for a signed settlement letter and send it to the bureaus themselves.
Two or three months after the debt has been repaid, the consumer should check with the three main credit bureaus to make sure the debt has been removed from their credit report.
Letter Should Have a Polite Tone
The debt settlement letter should have a polite tone. This is not the time for the consumer to express frustration or anger about their financial situation. The consumer should also keep a copy of this communication, and any enclosures as well as proof of debt repayment such as cashed checks or bank statements.
If the debt has been turned over to a collection company, the consumer should not try to negotiate with them. They should only deal directly with the creditor.
Here are sample debt settlement letters. They should be in formal business letter style and sent by certified mail, so the consumer has proof of the time and date the letter was sent and received.
Sample 1 - Debt Settlement Request Letter
City, State, Zip Code
City, State, Zip Code
RE: Account number
To Whom it may Concern:
This letter is a formal debt settlement request. Due to an automobile accident in which I was severely injured, I was not able to attend my job and have since been fired. Because of this, I have not been making regular monthly payments on my Name of Company credit card debt.
When I am well, I will continue to work, so I would prefer not to apply for bankruptcy at this time and would like to work out an agreement with you for settling the debt.
Because my finances are in such bad shape, I am asking that my account be closed. I would like the interest charges, both accrued and future, be waived and a plan for monthly payments considered for the rest of the debt.
I can offer AMOUNT every month to repay AMOUNT that is the current balance owed. I hope we can agree on a monthly payment that is suitable for us both.
I would also like to request that my account be shown as current and that all of the negative listings related to my account be deleted from the three major credit bureaus: Experian, Equifax and TransUnion.
I have enclosed a debt settlement agreement that you can sign and return to me if you are agreeable to the terms I have proposed. Please contact me by phone at 555-123-4567, email [email protected] or by letter to discuss the new monthly payment amount.
I hope that we can agree on terms that will allow me to close this account and avoid bankruptcy because this is my best effort to repay you part of the balance owed.
Thank you for your time and consideration in this matter.
Consumer’s Name Printed
List of Enclosures
Sample 2 - Debt Settlement Request Letter
ABC Global Collections
7700 Brice Rd.
Reynoldsburg, Ohio 43068
Re: Account # 2B45T90C12J
Dear Sir or Madam,
My account for Capitol One Auto Finance has been placed with your company for collection. I have not had the means to be able to pay this debt and have avoided contact with your company. However, this year I received a tax refund and would like to try to settle this debt.
The original account number associated with this account from Capitol One was 2389045768. The balance on the account at the time of collection was $2,789. After you have added all your late fees and interest, the balance at last statement was over $5,000. I would like to propose a settlement offer to clear this debt.
Since the original amount owed was $2,789 I want to start working from that number. The nearly $2,500 in interest and late fees is observed. I offer a settlement on this account of half, which would be $1,400. This should cover the account and late fees and close this account.
I would also like this reported to my credit bureau as paid in full. If accepted, I would be willing to pay this account today by credit card over the phone, or to do an overnight payment to your company. Please contact me as soon as possible at, 614-890-7843. I look forward to speaking to a representative.
Sample 3 - Debt Settlement Request Letter
May 18, 2015
Account Number: 123456789
ABC Credit Card Company
444 Harrison Lane
West Buford, Texas 67829
RE: Request payoff settlement of my account
To whom it may concern:
I am writing this letter that will serve as a formal offer to pay off my past due balance on my credit card of $680.00 with you, ABC Credit Card Company, account number 123456789. Due to my financial hardship, I cannot pay the entire balance in full. But, I am able to pay a lesser amount that I think is reasonable given my dire circumstances.
I want to formally request that if I agree to pay a one lump sum of $400.00, my account will then be paid-in-full and I will no longer receive any more bills or letters to pursue action against me.
If you agree to this one lump sum amount, I’m also asking that you do the following:
• Immediately close my account so no additional penalty fees or interest is applicable.
• You send a formal written confirmation of this agreement to my address and keep a copy on file.
Upon agreeing to my proposal and after receiving your confirmation in writing, I will readily pay the amount of $400.00 within 10 days of receiving your written confirmation using a certified check.
Thank you for considering my proposal and giving it your prompt attention. Please contact me anytime at (564) 877-1234 to discuss this matter further.
(sign your name here)
38 Sunny Lane
Mountain View, Montana 89436
Sample 4 - Debt Settlement Request Letter
City, State, Zip Code
City, State, Zip Code
Dear Name of Recipient,
The purpose of this letter is to formally request a settlement for the medical bills I owe your hospital. I regret that I am unable to pay the bill in full at this time because my monthly income has been greatly reduced after the automobile accident in which I broke both of my legs.
I am requesting a payment plan of $100 per month until the time that I am able to continue working and receiving my usual salary. The rehabilitation may take from six to nine months. At this time, my income is $$$$ and I have a home mortgage of $$$$ to pay. I will pay by check on the 15th of each month beginning DATE.
If this is agreeable to you, kindly send me a letter stating the repayment details as I have described. I can be reached at 555-123-4567 or a [email protected], and I would be happy to talk to you and give you more details at any time.
Signature of Consumer
Printed Name of Consumer
List of Enclosures
By Andre Bradley