Writing a Debt Settlement Offer Letter (Free Templates)

Debt Settlement

Some debts may be long and strenuous to service. As a debtor, you will often have to renegotiate the terms of the repayment. For that to happen, you have to notify your creditor well in advance and preferably in the form of writing. That is the Debt Settlement Offer Letter comes in.

It is a letter-cum-form that is used to convey the willingness of the debtor to close a debt on the condition that the creditor and he enter new terms of references. This letter is not final and is merely a request to have the creditor come to the negotiation table and talk to the debtor.

What to include in a Debt Settlement Offer Letter

A typical debt settlement offer letter ought to include the following pieces of information or details:

  • Names of the Debt Collector and the Creditor – These are the names of the debt collection agency and the actual creditor who, in fact, advanced the loan.
  • The date of references – The dates when the debt was entered into and the one that is used as a reference for any future engagement.
  • Debtor’s Name – This is the person who owes the amount of money in question.
  • Account Number – Each debtor is often assigned an account number by the creditor or the debt collection agency. This number is unique and is mainly used to distinguish one debtor from another one.
  • Outstanding balance Owed – It is the amount of money that the debtor has to resettle fully. It is arrived at by subtracting the amount settled from the original debt/loan.
  • Agreed-upon Resettlement Amount – How much money the debtor would like the creditor to have him repay at the tail end of the negotiations. This amount is often less than the full amount that was originally owed.
  • New Repayment Period – Just like the new amount above, this is the new length of time within which the agreed-upon amount now has to be resettled. Closely related to this is whether the amount ought to be repaid as a lump sum or in installments.
  • Installments – If the amount is to be repaid in tranches, the letter has to specify the value of each tranche to be repaid within the specified amount of time above.

Why Write a Debt Settlement Offer Letter?

There are a number of reasons to draft the debt settlement offer letter. Below are the key reasons why this letter ought to be drafted:

Plead for Debt Renegotiation

Its primary purpose is to plead for the renegotiation of debt. As we have already explained, the letter basically asks the creditor to allow for the terms that govern the repayment of a debt to be looked at afresh with the aim of arriving at a more favorable regime.

Forestall Blacklisting

In the case of defaults, the debtors are usually blacklisted or referred to the credit reference bureaus. The letter also forestalls this eventuality by asking the creditor to reconsider the terms. Any impending blacklisting is also always suspended until a final solution is reached. That gives the debtor some kind of a reprieve.

Diminish the Debt Burden

Some debts are too burdensome to repay. Those that take too long or are subject to penalties and other forms of punitive acts are top examples of these. A debtor may hence take advantage of this letter to diminish the debt burden by chiefly negotiating terms that are favorable to him.

Sample Letters & Templates

Sample Debt Settlement Offer Letter

Your Name

Your Address

Your City, State Zip Code

Your Phone Number

Your Email






City, State Zip Code

Respected Mr. /Ms. Last Name:

Re: Debt Settlement Offer Letter

As you know, I borrowed a sum of $15,000 from you 6 years ago. Under the terms of references, I was to enjoy a grace period of 1 year, after which I was to repay the entire balance alongside a 10% interest ($1,500) within 5 years.

That has not been the case, though, because I have only managed to pay half of the amount ($8,250). Unfortunately, there is really no end in sight as I might never be really able to raise the whole amount within a reasonable timeframe.

Nonetheless, I can pay a lump sum of $1,000 right away. I hence plead with you to consider revising the terms of repayment to capture that fact. If you give me the go-ahead, I shall settle the whole amount pronto.

I am waiting to hear from you…


Signature (hard copy letter)

FirstName LastName

Email Sample

Dear Mr. /Ms. Last Name:

Subject: Your Name – Debt Settlement Offer Letter

You advanced me a soft loan of $680 three months ago. I was to repay the whole amount at the end of the third month. That, however, did not happen for the reason of my financial fortunes, having not shot up as anticipated.

I am sorry to let you know that I might never pay up the amount in full within a realistic timeframe. I hence urge you to push the repayment period to the end of the year. That means you are adding me an extra 9 months.

Sorry for the inconvenience caused, and it is my hope that you shall consider my plea favorably.

Sincerely Yours,

Your name

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    Frequently Asked Questions (FAQs)

    In this section, we look into some of the questions that are frequently asked concerning the issue of the debt settlement offer letter:

    What percentage of a debt is typically accepted in a settlement?

    A. Roughly 30% to 80%. The exact percentage is often dependent on the age of the debtor, cash at hand, the amount of debt, morbidity, the outstanding balance, and the negotiation powers of the debtor concerned. You ought to bargain as much as you can for the best rates.

    Can I pay my original creditor instead of a collection agency?

    It all depends on the terms of references that govern the debt instrument. If it says you have to pay it through a debt collector, you have no choice but to do so. Otherwise, you have to engage the real creditor in person under normal circumstances.

    Helpful Tips for Writing a Debt Settlement Offer Letter

    Drafting a favorable debt settlement letter is no walk in the park. There are things you have to care for and tips you have to adhere to. We examine a couple of them here below:

    • Familiarize yourself with the relevant rules – Each jurisdiction has its own rules and regulations that govern the debt instruments. You have to familiarize yourself with them to be able to know how best to confront the issue. You have to play by the set rules of the game.
    • Engage the creditor Directly – It is important that you engage the creditors directly instead of third parties like the debt collection agencies. That is because the original contract is strictly between you and the creditor as the contracts hardly ever include some third parties.
    • Maintain the letter short and concise – As always, you have to maintain the letter as short and concise as can be. No need to fill in too many pieces of information that may bore the reader and water down the contents considerably.
    • Use persuasive rather than forceful language – Remember this letter is a request. You are not entitled to debt relief or renegotiation of the terms of engagement at all. Thus, the language you use has also got to be persuasive rather than forceful.
    • Send courtesy copies to the collection agencies – We have already stated that you would rather work with the creditor directly instead of through the third parties like the debt collection agencies. That notwithstanding, you should still send courtesy copies to the agency and other third parties who may be related to the dispute.
    • Back your communications – Always back all your correspondences and communications for future references. This should happen through the ways of soft and hard copies alike. You will need these backups for your negotiations and dispute resolutions.


    Drafting a Debt Settlement Offer Letter is no doubt a critical step to take to be able to have your debt reorganized and the terms made favorably. This being the case, you can never gamble with it. Instead, you have to read the explanations we have indicated above keenly before setting out.

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