Write a Debt Settlement Letter

Start Your Own Debt Negotiation

The first step in how to negotiate debt with a creditor is to write a debt settlement letter.

Make sure your letter follows a standard format, which is clear and concise.

Why Write A Debt Settlement Letter?

There are various debt settlement firms who are willing to negotiate with creditors for the debtors. Unfortunately, debt settlement firms may charge a significant fee for their debt negotiation service, which can be unaffordable for many people. If you had loads of extra cash, you would not have this problem! To save on this fee, many debtors choose to negotiate with their creditors directly.

Due to today’s tough economic realities, many people are faced with a decision regarding whether or not they should declare bankruptcy. Since bankruptcy leaves a negative mark on a person’s credit report for up to 10 years, it is highly recommended that it be avoided at all costs. To avoid having to declare bankruptcy, many people attempt to settle their debts with their creditors.

There is no cost to you for trying this idea!

Take The First Step To Debt Free Living!

The first section of the debt settlement letter should explain the situation that the you are in. A debtor should mention which life circumstances got them into debt in the first place. This section should be sure to not sound too frivolous, but instead focus on negative circumstances such as loss of a job, rising housing costs, or unforeseen medical expenses.

The next section of your negotiation letter should address what the your goal is. This section should outline what you want negotiated. This could be either a reduction in outstanding principal due, a decreased interest rate, or an extension of the loan repayment period. If the outstanding debt is a revolving line of credit, the debtor should suggest transferring the debt into a form of an installment loan. This section should also explain how you will be able to make the new payment in the future.


The last section should explain how settling the debt would also be beneficial for the creditor. The debtor should be sure to mention that if the creditor is unable to help settle or renegotiate the terms of the outstanding debt that they will not be able to make any payments going forward. Therefore, the creditor will see that if they do not negotiate the debt, they are risking a total loss.

The worst thing that can happen is the creditor says no. And it cost you nothing to try.


Leave our debt settlement letter information, Get back to learning how to make a budget!