You can typically make debt settlement offers in two ways: either over the phone or by mail. Some people prefer to make their negotiations through the phone because it eliminates the time it takes to receive a letter and get a response back. Other people like to settle accounts through written correspondence because creditors don’t get the chance to talk you out of a settlement. People have been successful with both methods. If you choose to make a debt settlement offer by mail, here’s what you should include in your letter.
- Keep your letter short and to the point. Don’t give a complete rundown of your situation in an attempt to get sympathy from the creditor. The creditor probably won’t read the entire letter anyway. Just give one or two sentences to explain what happened and why you can’t pay your debt. For example, “Expensive medical debts have kept me from keeping up with my regular payments.”
- You should make sure you let the creditor know that your financial situation hasn’t improved to the point that you can make regular monthly payments on your account. Add that you may be able to come up with a lump-sum payment to settle the account if the creditor is willing to accept the offer.
- Calculate your settlement amount. Decide how much money you can afford to put toward this debt and include that amount in your settlement letter. Typically the amount should be between 40% and 60% of the total amount that’s currently due on your account. Refer to a recent copy of your billing statement to figure out how much you currently owe.
- If you’ve already settled some accounts, you might mention this. But, remember that your creditor can access your credit report to see whether accounts have already been settled or if you’re current on your payments to other creditors.
Settlement Letter Tips
You probably should not tell the creditor the specific amount of money you have to settle all your accounts. The creditor will likely refuse your settlement and instead demand that you use all your money to pay their specific account. They’re not concerned about whether you pay your other debts.
Send the letter via certified mail with return receipt requested. This gives you proof that you mailed the letter and proof of who received the letter. You should also make sure you send the letter to the creditor’s address for correspondence. This is usually different from the address for payments. If you have questions about which is the correct address, call the creditor to ask for the address but be prepared to dodge questions about making a payment on your account.
You can call to check on the status of your offer within a couple of weeks if you haven’t gotten a letter back from the creditor. Remember that settlement offers are typically time-sensitive, especially if you’re trying to avoid a charge-off. You can call the creditor and say, “I sent a letter regarding my account and I wanted to see if someone has reviewed my offer.”
You should not accept an offer that you can’t afford to pay. Just wait a few weeks and try again to see if the creditor is willing to accept a lower payment.
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