How to Write a Debt Settlement Offer Letter

What is a Debt Settlement Offer Letter?

A written proposal to settle an outstanding debt for less than the full amount owed.

When to Use This Letter

You should send a debt settlement offer letter when:

• You cannot afford to pay the full debt amount
• The debt is in collections or significantly past due
• You have a lump sum available to settle the debt
• You want to avoid bankruptcy or further collection action
• The creditor has indicated willingness to negotiate

What to Include

Your debt settlement offer letter should include:

• Your name, address, and account number
• Current total debt amount
• Your specific settlement offer amount
• Payment terms (lump sum or payment plan)
• Request for deletion from credit reports (if possible)
• Condition that settlement is contingent on written agreement
• Deadline for creditor response
• Statement that offer is not admission of liability

Sample Language

Here's an example of how to structure your letter:

I am writing to propose a settlement offer for the outstanding debt on account #[ACCOUNT], which currently has a balance of $[AMOUNT]. Due to financial hardship, I am unable to pay the full amount. However, I can offer a one-time settlement payment of $[OFFER] to resolve this matter in full...

Note: This is sample language only. Your actual letter should be customized to your specific situation.

Common Mistakes to Avoid

• Offering more than you can actually afford to pay
• Not getting settlement agreement in writing before paying
• Failing to specify that payment is "settlement in full"
• Not requesting debt deletion or "paid as agreed" credit reporting
• Making the first payment before receiving signed agreement
• Not keeping records of all correspondence and payments

Legal Considerations

Settled debts may have tax implications as the forgiven amount could be considered taxable income. Ensure you receive written confirmation that the settlement amount constitutes "payment in full" before making payment. Consider negotiating for deletion of negative credit reporting as part of the settlement.

Related Letters

You may also need:

• Debt Validation Request Letter

Prepare Your Debt Settlement Offer Letter with PastDu

PastDu guides you through every detail with straightforward questions. No legal jargon, just clear guidance to prepare a professional debt settlement offer letter.