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Fillable Form Debt Settlement Offer Letter

Debt Settlement Offer is sent to a creditor containing a proposed arrangement of payment terms. Once this letter is agreed upon by the recipient, both parties will enter a debt settlement agreement.


What is a Debt Settlement Offer Letter?

A debt settlement offer letter is a proposal that is presented in writing and it shows that you are offering a specific amount of money in exchange for forgiveness of your debt to another person. The letter addresses why you are unable to pay the debt, how much you’re willing to pay now, and what you would like from the creditors in return. The parties must work through or agree on the terms and conditions written in the letter.

What is Debt Settlement?

Debt settlement is a detailed process wherein you negotiate terms with your creditors in hopes of them absolving you from your debt. A decent portion of the debt is proposed to the creditor, and through debt settlement, the amount will be presented upfront in exchange for the full amount to close.

These are the key steps in reaching a debt settlement:

  1. You can work on your own or you can hire professionals but their fees are expensive.
  2. You must save the amount you are proposing before writing the settlement letter. If your creditor agrees to the proposal, you will need to pay the amount at a given time frame.
  3. Write a debt settlement offer letter to your creditor. Indicate the situation you are in and explain why you are unable to pay the full amount of the debt. Also put in the letter what you expect from them in return, such as forgiveness of the debt, or the account shown as paid in full in your statements.
  4. Before sending the payment, ask for a written confirmation that your proposal has been accepted. This written confirmation may act as leverage for any future complications.
  5. Send the payment and keep in touch with your creditor until all the terms and agreements specified in the written letter have been fulfilled.

What to consider before proposing a debt settlement?

Sending a debt settlement offer letter to your creditor has the potential to do both harm and good. It depends on your current situation whether this will do you good or bad. If you have the resources to pay the debt in full amount, pay the debt so that you will be free of any inconveniences in the future. If you are in an unfavorable situation, proposing a debt settlement is an option you should definitely consider.

Advantages and Disadvantages of a Debt Settlement Letter

Like many circumstances in life, writing a Debt Settlement Offer Letter has its advantages and disadvantages.


  • Debt Settlement is beneficial when you are in financial hardship.
  • Settling is never guaranteed but it can put you in a better financial situation.
  • If the settlement is accepted, the amount usually settles at around 50 to 80% of the full debt.


  • If the settlement is not accepted, the debt you originally owed may increase due to missed payments and late fees.
  • If you hired professionals, you may owe them fees and payments. If the settlement is not accepted, hiring professionals only adds to your expenses.
  • Debt settling often appears as a bad financial move and can damage your credit score.
  • Missed payments may still be reported in your statements.
  • Debt settling may cause other creditors to see you as an unreliable debtor in the future.

How to fill out a Debt Settlement Offer Letter?

It is important to be explicit and detailed when writing a Debt Settlement Offer Letter. Include your personal information and contact details so that you can be easily identified. Provide the amount you intend to pay, a good settlement is usually 30 to 50% of the full amount of the debt.

Indicate in the letter the situation you are in, so that the creditors will truly believe that you are not capable of paying the full amount. Creditors may ask for proof regarding your financial situation especially when it is a physical injury, or loss of job and the like.


Enter your full name.


Enter your address.

City, State, ZIP

Enter the city, state, and ZIP code of your address.


Enter the date when the letter is being written.

Body of the letter

The body of the letter requires you to enter the amount you are willing to offer. Enter the amount in words and in numbers.


Enter your email address if it is available.


Enter your mobile cellphone number.

Home phone No.

Enter your home phone no. if it is available.

Work phone No.

Enter your work phone no. if it is available.


Provide your signature.

What to expect after sending your letter?

You will be anxious to see if your creditor accepts or rejects the request after submitting your message. Having a reply date in your letter would help your chances of a timely reply for this reason. As you wait, if they consider your bid, make sure you have saved up the agreed sum of money and are ready to pay. Requesting proof that they have received your payment may also be a smart idea.

Check your credit report and account to make sure that the necessary changes have appeared. Debt settlement may relieve you of your debt, but it may have a negative impact on your financial health. When you settle a debt, it appears on your reports for some time and if other lenders see this, then you might have a hard time applying for loans in the future.

Debt settlement can be worth your while if a hardship causes you to find yourself struggling. Note that it's very important to be careful with your words when writing a letter. When it comes to liability, a well-thought-out debt settlement letter will make all the difference. This helps to ensure that their side of the deal is upheld by all parties.

Since your credit score may be negatively affected, you may feel insecure about settling your debt. You may be afraid of creditors believing that you are a bad candidate for potential financial applications. Bear in mind that for individuals working towards restoring their credit, there are still many credit card and loan options out there.

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