Debt settlement, also known as debt negotiation or debt arbitration, is a process wherein the debtor and creditor get into a mutual agreement which states that the debtor is not in the condition to pay the entire outstanding amount and therefore will pay a part of the total sum as payment in full. In some cases, the creditor may even exempt the entire outstanding amount, but the chances this happening are very rare.
Debt Settlement Letter
A debt settlement letter is one of the most important tool of the entire settlement process. In fact, it’s the debt settlement negotiation letter which initiates the entire process between the creditor and debtor. That being said, knowing how to write such settlement letter can be very useful.
Templates
As it is a formal letter, it has to be present in a precise manner. The best option is to keep it to the point, with no overtones. Given below are two templates which will help you get familiar with the format of this letter.
Template #1
[Designation of the person in charge]
[Name of the financial institution]
[Address]
[Date]
[Subject]
[Salutation]
[First paragraph: A brief introduction about you and your account details]
[Second paragraph: Reason because of which you can't pay the outstanding amount and initiation of mutual agreement]
[Third paragraph: A brief note about attachments and conclusion]
[Closing]
[Signature]
[Name of the debtor]
[Address]
Template #2
[Name of the person in charge]
[Name of the bank/creditor]
[Address]
[Date]
[Salutation]
[First paragraph: Introduce yourself, give some details of your account/monetary transactions along with a passing reference to the financial crisis that you are facing.]
[Second paragraph: Give the details of the financial crisis owing to which you can't repay the debt and your proposal for mutual agreement.]
[Closing]
[Signature]
[Name of the debtor]
[Address]
Sample Letter
The Manager
National Bank
Sacramento, California
Dated: 03/11/2010
Subject: Debt Settlement Letter
Respected Sir,
I am Ralf Richards, a resident of Sacramento, California. I have been holding a credit card account (No. HGFG843443864145) with the National Bank for a period of last 2 years. I have been using the same amount to make all my transactions over this period.
As a result of some financial issues which have come up all of sudden, I was not able to pay the due installments for the last 4 months. It is a major financial crisis which has left me crippled, and therefore it won’t be possible for me to repay the due amount anytime soon as mentioned in our agreement. That being said, I would like to request you to take my financial problems into consideration, and allow me to pay 50 percent of the entire outstanding amount as the full and final payment of my credit card debt.
I have attached all the necessary documents which reflect my present financial situation with this letter. I am hoping that you will take a note of my present condition, and allow me to pay a part of the outstanding debt so that I am relieved of the outstanding debt at the earliest.
Thanking you in anticipation.
(signature)
Ralf Richards
(Company/Address)
You will have to make sure that you quote a decent enough amount as the part full and final debt repayment. Basically, the creditor will take keen interest in debt settlement negotiation only when he realizes that getting a part of the outstanding amount is better than losing the entire amount. If you still think it is a tough task for you, you can also approach some debt settlement company, which are well versed with the entire process of debt negotiation. For a stipulated amount of fee, they will carry out all the proceedings required in the entire process.
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