Sample Settlement Of Debt Letter

Use This Free Sample Letter To Settle Your Debts

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Debt Negotiation Guide:

Stage One
Contact Creditors

Stage Two
Prioritise Creditors

Stage Three
Financial Statement

Stage Four
Make Offers




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Sample Settlement Of Debt Letter

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View The Sample Settlement Of Debt Letter

Other Pages You May Find Useful:
Advice On How To Negotiate Debt Settlements
Advice On Using Debt Settlement Companies
Advice On Using Debt Management Companies

About This Sample Settlement Of Debt Letter

You will find a sample settlement of debt letter on this page, which is designed to help you write to a creditor, making an offer of full and final settlement. Clearly this is only an option if you are able to find enough money to make a reasonable lump sum payment to the creditor. If you do not have funds to make such an offer, then you really need to be writing a letter that makes an offer of a reduced monthly payment instead. This is covered in detail in my main Debt Negotiation Guide, and you can find full details, including an appropriate sample letter on the Settlement Letters To Creditors page of my Guide.

Settlement of debt is about being able to get rid of the debt in a short period of time so that you can begin to move on. As this is usually more desirable than making arrangements to repay debts over a period of some years, it tends to be the preferred option for most people. Not everyone can access enough money to make any lump sum payments, but it can be well worth borrowing from relatives, friends or other sources in order to be able to make payments in settlement of debt.

Sample Settlement Of Debt Letter: The Principles Of Debt Settlement

It is important to understand what it is you are trying to achieve by writing to the people you owe money to, and how the debt settlement process works. Debt Settlement is a process whereby you seek the agreement of your creditors to accept considerably less than the full amount of your debt in full and final settlement. As this involves them writing off considerable amounts of money, they are not going to do this lightly or just for the fun of it. Certain conditions need to be in place and you need to be aware of these and take steps to approach your creditors in the right way.

There are many professional debt settlement companies in the US that offer to undertake settlement negotiations on your behalf, and they will generally expect to get over half of your debts written off (the nearest equivalent process for UK residents is using an IVA). Reputable companies will not offer to provide this service for you unless you are in a very serious debt crisis and genuinely struggling to repay your debts. This is because creditors are never going to agree to settle if they think that you could actually afford to pay the full amount.

A creditor may respond well to a settlement of debt letter if they believe that the offer you are making could be the most they are ever likely to get. If they think that the alternative could be that you go bankrupt and they get little or nothing back, then a reduced settlement begins to look like the most attractive option.

Sample Settlement Of Debt Letter: The Need For A Financial Statement

Your creditors are unlikely to play ball unless they believe you are in real financial difficulties, so you need to be able to provide good evidence of this when you write to them. You can do this by preparing a Personal Financial Statement and enclosing it when you write your settlement of debt letter. You can find detailed advice on how to prepare one of these on the Personal Financial Statement page of this site.

When you write your settlement of debt letter you will be asking your creditors to accept a greatly reduced amount of money in settlement of the debt. To justify your proposal you need to explain clearly and honestly why you are in financial difficulties (if you have not already done so), show them the exact financial situation you are in (by enclosing your Personal Financial Statement) and demonstrate that you are treating them fairly and that no other creditors are getting any better offers or payments.

You should also ask them to agree to make the necessary approaches to credit reference agencies so that your credit record has an up to date record of the debt being satisfied. This is important in helping to prevent your credit rating being any worse than necessary.


Sample Settlement Of Debt Letter

Adapt the following letter and add your own details to make a settlement offer to each of your creditors.



Your Name
Your Address



The Date

Creditor Name
Creditor Address

Without Prejudice

Dear Sir/Madam,

Re: (insert any account number or reference number here)

(insert a paragraph here to explain honestly and clearly why you are in financial difficulties, or if you have already informed them you could put: "I wrote to you recently to explain that I am currently experiencing financial difficulties because of...")

I enclose a Personal Financial Statement, which gives an accurate picture of my situation, which as you will see clearly demonstrates that I do not have sufficient funds available to meet all my commitments. Despite not being in a position to repay my debts in full, I have been able to raise funds in order to make payments to a few key creditors in settlement of my debts.

I am therefore able to offer you £.... in full and final settlement of the above account. This offer is made on the understanding that if you accept it your company will consider the debt settled and take no further action to recover any more money, releasing me from any future liability.

I would also require that if you accept this offer of settlement you inform the three credit reference agencies that this account has been satisfied in full.

I do hope you feel that this is a fair offer in my circumstances and that you will accept the payment offered. If the settlement amount is acceptable I would be grateful if you could confirm your acceptance in writing at the earliest opportunity. I will then make the full payment by return.

I look forward to hearing from you

Yours sincerely



Your name









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