5 Tips to follow to write a good debt settlement letter

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Ask Sanders Patricia
5 Tips to follow to write a good debt settlement letter

While settling the debts on your own, you need to negotiate with the creditors or the debt collectors. You need to talk to them about the financial stress you are in and that you would still like to pay off debts. As a result of this, you would like to get some help from the creditor. You will be required to provide the creditor with the copies of your income and the expenditures so that they get an idea on the financial hardship you are in.

You will also have to miss payments on your credit card accounts so as to prove that you are in real financial hardship. However, you need to do the work properly. You need to approach for the settlement by writing a letter to them. Writing a formal letter when settling your debts can make the entire process look more professional and authentic.

What is a debt settlement letter?

A debt settlement letter is sent either by the creditor or the debtor which is supposed to contain all the details of the debt on which the settlement is to be done. This can act as the proof of the settlement agreement.

If you are going to send a settlement letter, you will be required to mail it through the Certified Mail with a Return Receipt Request (RRR). This will help you in knowing whether or not the mail or the letter has reached the concerned person and if the concerned person has signed on to receive the letter.

So, you can see that in case of the credit card settlements, the settlement letters are extremely important. You can check sample debt settlement letters from our website.

5 Tips to write a debt settlement letter

If you want to get approval for debt settlement, you should know how to write a debt settlement letter. You can communicate with your creditors more effectively with the help of a debt settlement letter.

If you’re not aware how to write a legally binding debt settlement letter, you can check out these tips:

1 Determine the total amount of debt you owe

The first thing that you need to do is to determine the total amount of debt you owe before you start writing a debt settlement letter.
Unless you know the exact amount you owe on all your credit cards, you’ll not be able to decide how much you can negotiate for to settle your debts.
You have to mention that amount while writing the debt settlement letter.

2 Try to know the names of your creditors

When you write a debt settlement letter, you need to mention the exact names of the creditors to whom you owe the money. If you decide to settle through a settlement company, it will help the debt consultant to negotiate with them to reduce the payoff amount on the accounts. If you’ve forgotten the names of your creditors, you can pull out a copy of your credit report as all the names of the creditors will be mentioned in your credit report. You can take the names from your report and then use it while writing a debt settlement letter.

3 Mention the amount you can pay to settle debts

You have to mention the amount that you’ll be able to pay to settle the debts.
You need to take into account your total income in a month while mentioning the amount that you’re ready to pay to settle the debts.

4 Explain your financial hardship

The most important part of the debt settlement letter is explaining the financial hardship that is barring you from making the monthly payments on time. Unless you tell them about your financial hardship, they will never know what the actual reason is, that is barring you from making the total amount you owe them. Tell them the truth and be humble while writing such a letter.

5 The letter needs to be formal

You need to write a letter including some important details. Remember, the format of the letter should be formal. Following are a few things that you need to include in the letter.

  • Write your own name or company name, address, zip code at the summit of the page. Provide a double space and follow it up by the current date.
  • Give a double space and type the creditor’s name, address, and zip code along with your account number for reference.
  • If possible, address the letter to the most helpful person.
  • Explain your prior debt condition and your current financial position. Enlist your net debt amount. Also include any improvement in your condition to pay back your debts, for example, a fresh job or another source of earning.
  • Mention your proposed terms and debt settlement amount. Be certain to include the highest amount you can pay.
  • Write your own name, signature, and present date tagged along with your printed name and date.

Knowing the tips to write a debt settlement letter is important because if you don’t write it properly, your proposal may not get approval. Write a legally binding debt settlement letter so that the creditors get impressed by the reason that is keeping you from making timely payments.

However, after you settle your debts, you should make the monthly payments on time so that you can avoid further debts in the future. By doing so, you can also avoid trashing your credit score.

Last Updated on: Mon, 18 Feb 2019

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