What should I know when writing a debt settlement letter?
A debt settlement letter is written to your creditors in an attempt to convince them to allow you to settle your debt "at a discount." In other words, you are essentially asking your creditors to forgive some of what they owe you. Generally, creditors are not going to do this out of the goodness of their heart- they are going to do this if they are afraid that you are going to declare bankruptcy or that they aren't going to get paid if they don't accept your settlement offer. There are a few key things to know when you are writing a debt settlement letter or when trying to negotiate a settlement of your debt:
- Creditors are more likely to negotiate with you if you are already late or behind on payments. If you are current and making all the payments on time, even if it is a struggle for you to do so, they have no reason to settle with you... after all, they are getting paid. This means you usually need to wait to write your letter or make your offer until after your delinquent. However, don't want too long or the creditors might sell your debt to a collections agency. Usually, you should send your letter once you are about three months late and you should not wait longer than 6 months from the time of your late payments.
- Creditors are also more likely to accept an offer where you agree to pay them all at once in a lump sum, as opposed to an offer of a payment plan. The one time payment gives them greater assurance that they'll actually be paid.
Usually, it is a good idea to get a debt settlement lawyer to write the debt settlement letter for you. A lawyer often has a better chance of successfully negotiating a settlement than you do on your own, especially if he already has an established relationship with that creditor.