Drafting an effective debt settlement letter is an effective optionfor a debtor who needs to reduce his or her outstanding debt. The letter is basically an offer to re-negotiate terms of the consumer/debtor's obligations that will allow him or her to pay the balance due. The letter usually requests that the creditor, most times a credit card company, lower the amount of the debt owed and in exchange the debtor, most often a consumer, offers to pay the reduced debt in full. If the payment cannot be in full, the consumer can request reduced monthly payments that are lower than the current amount owed.
Because the letter is an offer to negotiate, the creditor may offer a counter-offer and this may continue until both parties agree on a payment plan. Once an agreement is reached regarding the amount to be repaid, the creditor will stipulate a time period by which the full payment should be paid in.
The basic parts of a debt settlement letter should include the following:
There are three types of negotiating debt settlement letters. They include:
Counter Offer Letter
A counter offer for debt settlement is usually written in response to a creditor's demand for payment in full. In the letter the debtor offers a new term by which the creditor can repay the debt. In addition to the debtor's basic information and account number, the letter should explain the reason why the debtor cannot make a full payment and propose an amount the debtor can afford to pay. The debtor should include along with the the letter a statement of acceptance by the creditor which the creditor shoud sign and return if the counter offer is accepted.
Unsolicited Offer Letter
As a pre-emptive measure,a debtor who is suffering financial setbacks may draft an an unsolicited letter to settle the outstanding debt to a particular creditor. The letter should explain the debtor's financial current situation. The letter can also request that the creditor waiver any late fees and charge-offs on the account.
Request for an Alternative Payment Plan
Another negotiating letter is arequest for an alternative payment plan. The planshould offer a modification in payment terms. If the requested modification is only for a limited period, the letter should state that the suggested modification is temporary. Again the debtor should explain the reasons why the alteration is needed - for example, an unexpected change in the debtor's income or a sudden financial turn for the worse such as unexpected medical bills. The letter should include proposed payment dates as well as an assurance that the debtor will solve his or her debt.
If you face mounting debt, you may need to request new payment terms to your creditor(s). Consult an attorney to help you write an effective debt settlement letter.