Sample Settlement of Debt Letter

If you’re looking for a sample settlement of debt letter, it’s likely that you -or a client of yours- are working with a company to satisfy a credit agreement or you might be a lender needing to send a letter to a person who owes you money.

Oftentimes collection agencies send debt settlement letters

The settlement of debt letter is an important legal document. It contains the terms that the company owed money agrees to follow to help the consumer satisfy the debt. This is meant to help the consumer avoid further collection action and to help the company recover at least some of their funds.

Terms in the letter may include:

• A decrease in the total amount of debt.
• An increase in the timeline allowed to repay the debt.
• A lowered interest rate.
• An agreement to accept payment in installments instead of a lump sum.

Oftentimes these letters need to be sent out after an individual with delinquent payments has already received several collection letters but is unable to make timely payments due to personal circumstances. Sometimes companies wait to send them out until after they have requested the services of a third party collection agency.

Since every debt situation is different, there is not one standard sample settlement of debt letter. However, a typical letter from a creditor may read similar to as follows:

Dear Consumer,

I’m writing to you from ABC Bank to inform you of our decision regarding your delinquent credit card account. While your total amount owed on Visa account XYZ is $2,500, we will consider a lump sum payment of $1,200 on this account as payment in full. Note that we must receive this payment by November 3, 2010, in order to settle the debt according to these terms. Please rescind payment to ABC Bank, 1234 Main Street, Anytown, CA 90210.

Sincerely,

Anne Smith Collections Supervisor

The bottom of the letter is also legally required to contain the line "This is an attempt to collect a debt. Any information will be used for that purpose."

To see more examples of debt settlement letters, consult the following resources:

• National Debt Resolution has 16 sample debt settlement letters on its website. It is a company that provides collection services to financial institutions.
• CuraDebt, another debt settlement company, has images of over 75 actual settlement letters on its website. The clients’ and recipients’ personal information is removed, but the rest of the text is completely intact.
• DocStoc has a sample settlement letter written from the point of view of the consumer. It lists conditions, such as the fact that negative credit report listings will be expunged and pending litigation will be canceled. Sometimes a lawyer will advise a client to send such a letter in response to a letter from a creditor.
• EbooksHub has a free book that gives the consumer over two dozen sample letters to use as templates for letters to creditors. Some relate to debt settlement and some to other similar situations.

Whether you are the borrower or the lender in the case of debt settlement action, you should familiarize yourself with the terms of the Fair Debt Collection Practices Act. If a creditor violates the Act, even if the consumer owes a large sum of money, he or she opens up the possibility of legal action.

Both parties should know that creditors cannot use the following language in their settlement of debt letters:

• Obscene or otherwise abusive language
• Threat of arrest or physical violence
• Publication of his or her name in the media
• The solicitation of a postdated check
• False representation of the sender of the letter

The complete language of the Act is available through the Federal Trade Commission.

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