How to Write a Settlement Letter for a Creditor

If you've fallen behind on your credit card bills, negotiating a settlement with your creditor may be an option. A settlement allows you to clear debt by paying less than what you owe, giving your creditors a chance to reduce their losses. While you can hire a debt settlement company to negotiate on your behalf, you can typically achieve the same results by drafting your own settlement proposal.

Instructions

1

Calculate how much you can afford to offer as a settlement. The amount a creditor will settle for varies but you can expect to pay anywhere from 25 percent to 75 percent, depending on how much you owe and how delinquent the account is. Typically, creditors prefer to receive a lump-sum payment but some creditors may be willing to accept a payment plan.

2

Open a new word processing document on your computer and type your name and address in the upper right-hand corner. Insert a space and return to the left-hand side of the document. Type the creditor's name and address, insert two lines and type the date.

3

Insert an additional line after the date. Type the account number in the following format: RE: Settlement of Account XXXXXXXX. Insert a line and type the salutation.

4

State your name and account number in the opening paragraph. Explain to the creditor why you have been unable to pay i.e. unemployment, illness, divorce, etc. Offer to provide supporting documentation if it's available.

5

Outline the terms of your settlement proposal. State the amount you are willing to settle for and whether you prefer to make a lump-sum payment or multiple monthly payments. Explain to the creditor why you feel a settlement arrangement would be beneficial for both of you.

6

Close the letter by thanking the creditor for considering your offer. Sign the letter and make a copy for your records. Send the letter via certified or registered mail in case its receipt is disputed.

7

Wait for the creditor's response. If the creditor agrees to your offer, contact them to make payment arrangements. Offer to pay via money order, cashier's check or wire transfer.