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Fillable Form Debt Forgiveness Letter

Debt Forgiveness Letter is used to inform an individual of a cancellation of a debt amount. The recipient of this letter will no longer be subject to paying collection with this letter as proof.

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What is a Debt Forgiveness Letter?

A Debt Forgiveness Letter is a request letter asking for forgiveness from your creditor because you cannot pay the debt any longer. A creditor forgives some or all of the outstanding balance you owe. A debt forgiveness letter has to be your last resort for asking for forgiveness to settle your financial difficulties.

Moreover, this is quite appealing to handle your finances, but there are ends that you might need to consider. It does not mean that you are free from your debt when you ask for debt forgiveness as your last option. Yet, there are certain stipulations in this process, such as hard-to-follow rules, unexpected tax bills, and harm to your credit scores.

What is the purpose of writing a Debt Forgiveness Letter?

As much as you want to pay your debt to your creditor as originally planned, some unexpected circumstances may affect your finances including:

  • Loss of income
  • Loss of spouse’s income
  • Failure in business
  • Family medical bills
  • Divorce or death in the family
  • Work Relocation
  • Military duty
  • Being jailed
  • Severe property damage from a natural disaster, such as storms and hurricanes

These reasons do not give the debtor an exception to pay the debt. However, it still depends on the creditor to consider an individual for debt forgiveness. The main intention of the letter is to convince the creditor that the debtor is going through financial difficulties.

What are the common debt forgiveness options?

It is vital to know the common debt forgiveness options and the methods to make the debts manageable and understand the potential consequences.

Student Loan Forgiveness

A student loan forgiveness may depend on the type of job, income, and amount of debt. Programs that forgive, repay, or cancel education debt exist. This plan requires certain qualified borrowers who work in the public service or specific professions such as teachers or in-demand health care aides in low-income or remote areas.

It is not necessary to teach or work as a public service for you to get assistance in paying off your student load. Some borrowers are considered to get forgiveness if they have participated in certain volunteer programs or those who serve in the military.

Credit Card Debt Forgiveness

Issuers of credit cards are capable of forgiving balances as part of the debt settlement agreement. If the borrower is on the verge of bankruptcy, the issuer can make an arrangement for collecting some money as partial repayment than nothing.

The forgiven debt will be reported to the IRS and added to the borrower’s taxable income. However, the borrower’s credit score receives damages and they must have to monitor their current credit score standing. It would break another record of the borrower’s credit score if the issuer takes legal actions for such reasons.

Mortgage Debt Forgiveness

The federal government generally offers mortgage debt forgiveness. FHA homeowners may be qualified for several programs that prevent foreclosure or other assistance. The Home Affordable Modification Program is one of the programs that may reduce the monthly payments and a great portion of the total loan balance.

The Department of Housing and Urban Development started also offers several mortgage debt reduction programs. On the other hand, the bad side of mortgage debt forgiveness is losing your home and inflicting damages on your credit score.

Tax Debt Forgiveness

An individual can claim a tax debt forgiveness when an offer in compromise has been arranged. A tax bill will not be charged for the forgiven debt. The IRS accepts offers in compromise when a borrower or agency has nothing left or other ways to repay the money owed in a reasonable period. Moreover, IRS can hold on to the individual’s refund, take a portion of salary, put a lien on the bank account, seize and sell asset or property, and revoke a passport.

How to write a Debt Forgiveness Letter?

  1. RECIPIENT’S NAME

Enter the receiver’s full name of this letter.

  1. ADDRESS

Enter the address of the receiver starting with street number and street name.

  1. CITY, STATE, ZIP

Enter the city, state, and zip code.

  1. DATE

Enter the current date upon writing this letter.

  1. SALUTATION

Enter the name of the recipient.

  1. BODY OF THE LETTER

Enter the amount of debt and the reason for owing a debt of the debtor.

  1. YOUR DEBT HAS BEEN FORGIVEN IN-FULL

The creditor gives his or her approval for debt forgiveness or debt relief consideration to the debtor. The consumer must also agree upon the condition of this forgiveness letter that he or she will be receiving letters in the future for collecting a debt.

  1. SIGNATURE

The creditor must sign this letter as an acknowledgment of sending this letter to the receiver.

Receiving a Debt Forgiveness Letter

The creditor has the option to forgive your debt or not, depending on your circumstances. Debt forgiveness will also depend on the type of debt you owe. In general, the creditor may grant you any of the following:

  1. Debt forgiveness for less than the full balance owed.
  2. Full forgiveness of the debt.


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