What should you include in your debt settlement letter?
Are you tired of getting those incessant collection calls?
But have you ever wondered why suddenly you are getting collection calls?
Well, in that case, you might haven’t paid off your outstanding balance amount within 180 days from your last due payment date. Then you start getting collection calls either from your creditors or collection agencies. And now these collection calls are posing as bugbear in your life!
But, you don’t need to worry about this! We are there to help you out. And opting for debt settlement could be an effective way out for you.
Usually, your creditors sell off your debts to collection agencies after continued non-repayment of 180 days after your default date, that is, the last due date of your payment
“A lot of people are ashamed of having their debt, and that’s what debt collectors prey on,” says Ramon Khan, a former debt collector from Texas.
So, to opt for debt settlement, firstly you need to negotiate with your creditors or collection agencies to reduce your outstanding payable amount!
They might not agree at first when you try to negotiate with them. But you have to remain calm and propose a fruitful offer to settle debt with a reduced lump sum payment! You might have to convince them that bankruptcy can be an option you can think if they don’t agree for settlement.
But before you start settling your debt with a collection agency or your creditors, just go through the checklist carefully!
Validate your debt
You have got a federal right to validate your debts under the Fair Debt Collection Practices Act (FDCPA). So, the baby step would be sending a written request to the collector or your creditor within 30 days from getting intimated. But you need to know what a debt validation letter consists of. Generally, it consists of the following information:
- Amount of your debt
- The name of your creditor
Usually, you should get your debt validation letter from your creditors or collectors within 5 days from getting contacted for debt collection. *
Know your statute of limitations
It is the amount of time period within which your creditors or collection agencies can sue you in court for non payment of your debts. Each state has its own law on the statute of limitations (SOL) which usually ranges from 3 to 6 years! The SOL also varies from one debt to another!
According to the Fair Debt Collection Practices Act, your creditor or collector can’t contact you after the statute of limitations has passed!
But always remember that your credit report will always show your unpaid debt account for usually 7 years even if you have passed the statute of limitations!
Well, after going through the above points, you might be able to decide better for proceeding with your debt settlement process!
But, the question still remains is what percentage should you offer to settle a debt?
The rule of thumb says that you can start by offering is 30% of your outstanding balance amount to your creditors!
Let’s have a look at a few scenarios.
Initially, your creditors or collectors will call you for repaying your debts. So, you can start negotiating with them over the phone only! But in most of the cases, they won’t agree with you during the initial phone calls. You have to reiterate your financial condition and pledge for a settlement whenever they call you. So after a few phone calls, your creditors or collectors might agree with you. But make sure to send a letter of acceptance of verbal offer, after they confirm the negotiation process over the phone.
You can start negotiating with your creditors or collection agencies through letters to reduce your outstanding payable amount. As obvious, they will counter-offer you with a higher percentage of the said amount.
In that case, you need to send a counter debt settlement offer to your creditors or collectors. But,
what should you include in these letters?
A proper header:
You should include all the necessary information like your creditor’s name, address, the department along with the relevant date in the header of your letter. After that, mention your account number and the balance amount you owe!
Explanation of your financial constraints:
It’s quite normal to go through a financial crisis when you’re not able to repay debt Try to make them understand that amidst this unforeseen situation you are willing to pay off your debts by settling the amount.
Don't miss out an opportunity to explain your tough time and how eager you are to settle your debt and avoid bankruptcy!
Debt related information:
Well, this is one of the important constituents of your letter! Include everything regarding the account which you want to settle. For example, the debt amount, your default date, the date on which you have received the last intimation from your creditors or collection agencies, etc.
Usually, the creditors and collection agencies prefer a lump sum payment for settling a debt. Still, you can propose a settlement in the form of monthly installments.
In case your creditors or collectors agree, mention the amount which you can afford per month. Also mention how long it will take to pay off your reduced payoff amount.
Request for updating your credit report:
Your creditors mark those debts as “charge-off” in your credit report. This happens when you have become delinquent in paying off your debts for more than 180 days.
So, you should request your creditors to remove these late payments and charge-off from your credit report. At least the accounts should be updated as “paid as settled”.
Opting for a certified mail:
Go to a local post-office and obtain a Certified Mail Form 3800. It usually contains a green and white sticker including a barcode.
This will allow you to track your mail through the USPS (United States Postal Service)! And the form also contains a perforated receipt, which you can keep as proof of sending the letter. And someone has to sign while receiving your letter on behalf of your creditors or collectors.
Debt settlement agreement letter
In both cases, you try to cap your settlement amount by 50% of the total outstanding balance amount. Once your deal gets finalized, don’t forget to collect a debt settlement agreement from your creditors or collectors! It’s highly advisable not to start paying before you and your creditors both sign this agreement.