Debt Settlement Letter

When a defaulter does not pay the loan installments, usually after negotiations, a particular amount of the loan is agreed to be repaid by the debtor. After the debtor makes the necessary payments, he is issued a debt settlement letter by the concerned authorities. If you’re having trouble meeting the current plan or are short of some money a debt settlement letter is a professional way to negotiate.

No matter what the nature of your debt is whether it is a credit card debt, medical debt, or other unsecured debt (other than student loans, alimony and child support), the creditors and the agencies that collect the debt will often accept a mere 25% to the total debt as payment. If they are convinced that the debtor cannot pay the entire amount and that he is judgment proof, which means that the debtor has very few assets to seize through a lawsuit.

Debt Settlement Letter Writing Tips

Mention the exact amount paid by the debtor.
The letter should be short, precise and clear.
Make sure you have a track of inflow and outflow so that you can offer these details should the creditor ask for it.
Make it very clear that you will have to resort to bankruptcy if any.

Debt Settlement Letter Template

Use our free Debt Settlement Letter to help you get started. If you need additional help or more examples check out some of the sample letters below.

To,

__________ (customer’s name)

__________ (customer’s address)

__________

From:

______________ (Your name)

______________ (Your address)

__________________

Date __________ (date of writing letter)

Dear Mr. /Ms__________ (name of the concerned person),

This letter is to inform you that you are no longer a defaulter and the bank has accepted the payment you made towards your loan. The initial loan amount was _________ (mention amount) and after negotiations with you and our legal consultant, it is decided as __________(mention new amount).

Our company understands your concerns over the non-repayment of the loan. We appreciate your cooperation with our authorities in this regard. The cheque you have issued in the name of our organization towards the loan repayment will be cleared in a couple of days, and after that, we shall send you a final settlement letter from our legal officer.

We would like to have a fruitful association with you in future as well. We have tried our best to keep your credit history clean so that you will not encounter any problems in case you want to go another loan from any financial institution.

We once again appreciate your efforts and patience in settling this loan and contributing for the mutual benefit.

Yours Sincerely,

_________ (Your name)

Sample Letter

Given below is a sample debt settlement letter.

Raju Kulkarni,

34, Bank Street,

Hebbal,

Bangalore

Date: 21st August 2016

From,

IDBI Bank

Bangalore

Subject: Debt Settlement

Dear Mr.Kulkarni,

This letter is to inform you that the loan you owed to the bank has been cleared after negotiations. You have made a payment of 90 percent of the total loan amount which is Rs 4,45, 450. We understood your genuine concerns over the non-repayment of the loan amount and discussed with our legal officer. We spoke to you several times and gave you enough time to repay the suggested amount.

We are happy to receive payment from your side within the stipulated time. You are free from any more repayments towards your loan. This letter can be considered as a clearance letter, and you will receive a letter from our legal consultant as well.

We seek fruitful association in future

Thanking you,

Yours Sincerely,

Praveen Mistri

Manager

Email Format

Given below is a sample email for a debt settlement letter.

To: name@email.com

From: name@email.com