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Writing a Debt Forgiveness Letter (with Examples)

Despite our best efforts, it is common to find ourselves in situations that prevent us from fulfilling our financial obligations and other promises that we might have made. Losing your key source of income, making an emergency payment, or suffering from an injury can throw a wrench in your well-thought-out budget. While there are several options that one can use to repay their debt, there are some instances in which paying it in full will put you under financial constrain.

In such situations, you might consider debt forgiveness. Also referred to as “Debt Cancellation” or “Debt Relief,” debt forgiveness is when an organization/creditor clears all or a portion of a debt owed. Debt forgiveness, however, has its downside- other than repaying a portion of the debt, you may also have to pay a fee and can even get a negative listing on your credit score. Before considering debt forgiveness as an option, you must keep your eyes open to avoid falling into pitfalls that may lead to wishful thinking.

A debt forgiveness letter is a letter that is meant to inform an individual- the debtor- that they no longer have to repay the other party for the money owed.

Debt forgiveness letters are often sent after the creditor has decided that it is not worth posting the debt to collections, or they may as well benefit from accounting for the receivables as a loss on their tax returns. Either way, the debtor will no longer be obligated to pay the debt.

The letter can also be written by the borrower requesting that their debt be forgiven- usually when they’ve tried everything to repay back the loan or when they are not in a situation to do so.

What Should be Included in a Debt Forgiveness Letter

A debt forgiveness letter, just like any other official letter, must follow the official business format and be written in a professional tone. The letter should undoubtedly state the reason(s) for the possible default. This is particularly very important as it will help them understand why you are unable to make the payments as you had agreed. Thedebt forgiveness letter must also contain the present financial status and repayment capacity.

When writing the debt forgiveness letter, you should mention how much you can afford to pay and how much you’ve lost as a result of the financial strain you are undergoing. This is necessary as it will help the lender understand why you are unable to repay them back. You also have to mention how much you may be able to repay if given some percentage relief. Let the lender understand how much you are willing to repay them for them to gauge whether to give you the debt relief or not.

When writing a debt forgiveness letter, remember that you are trying to convince someone to let go of a debt that you owe them. It is important that you provide them with hard facts to back your claims. You can attach your medical records, bank statements, termination letter, etc., to help them better understand your condition.

Lastly, if there are any viable alternatives to repay the loan, make sure to mention them in the debt forgiveness letter. For instance, if you may be able to repay the loan at a later date and are requesting that the debt repayment period be extended, or if you may be able to repay the debt partially instead of being granted a 100% waiver, make sure to mention it in the debt forgiveness letter to give the lender viable options to choose from.

How to Write a Debt Forgiveness Letter

It is important that when you are not able to repay back a debt that you have, you look for alternative ways to settle the debt. However, if you are absolutely not able to do so, then it is important to craft a great debt forgiveness letter- one that will convince the lender to forego the debt that you owe them.

To do this, you must first understand how to write a debt forgiveness letter properly.


To start off, you have to begin the letter by properly defining the debt forgiveness letter. Introduce yourself and the debt that you are looking to be forgiven. You must mention who you are and why you are writing the debt forgiveness letter to help the lender better understand your letter.

Mention what is relevant

Mention the possible reasons why you may not be able to settle the debt as expected. It is important that when writing the debt forgiveness letter, you mention why you may not be able to repay the loan. It is recommended that you provide a valid reason(s) as to why you won’t be able to do so. At times honesty is the best policy- when you are not in a position to fulfill your financial obligations, it is important that you let the lender know in the best possible way.

Provide proof of hardship

After highlighting your reasons on why you won’t be able to repay the loan, provide proof of hardship. What happened that has hindered you from repaying the loan? Provide proof to back your reasons. You may attach your financial statements, provide your medical bill statement, or anything else that could help convince the lender that you are genuine and not deliberately avoid paying the debt.

Observe the time limits

Lastly, it is important to note that when requesting debt forgiveness, you should do so while observing the time limits. Notify the lender that you will not be able to repay them early to make the needed arrangements. They may have planned to use the money you repay for something urgent; informing them in time will help them look for other alternatives.

The tone

When writing the debt forgiveness letter, you should use a polite and respectful tone throughout the letter without any sign of anger or expectation. Remember that it is usually up to the lender to decide whether to forgive the debt or not; therefore, it is important not to come off like you are demanding that they forgive the debt but rather requesting them to do so. When writing the debt forgiveness letter, avoid providing unnecessary information, only provide information that is absolutely necessary to the lender to help convince them to forgive the debt.

Debt Forgiveness Letter Samples

Asking someone for financial assistance is hard- it is even harder when they lend you some cash, and you are unable to repay them, and now you have to ask them to forgive you of the debt. To do so efficiently, it is vital that you craft a great debt forgiveness letter – one that will help them understand your situation and possibly forgive the debt.

We hope that these samples will help you with all the information you need to write a compelling debt forgiveness letter. One that will help see you through your hard times.

Debt Forgiveness Letter

Stephen McMichael
564 Longwood Street
New York, NY 652
+65 862 8626 726
[email protected]

30th Jan 2021

Austin Peterson
872 Valley Road,
LA 63, Los Angeles

Dear Mr. Peterson

Re: Debt Forgiveness Letter

With great regret, I write this letter to inform you that I am unable to pay back your debt as per our initial agreement. Due to the Corona Virus Pandemic, I lost my job early last month, and now I have been surviving on the government Cheques for the past three months.

I was the sales executive manager at Vin Wine Café, but due to the new government directives on alcohol consumption and the closure of bars and restaurants, we had to shut down as the business was making no profits. Due to my reduced income and the government’s continued ban, I do not foresee any changes to my financial situations that would enable me to make the payments any time in the near future.

I modestly request that you forgive me for my debt of $563 as my financial status doesn’t support the debt repayment. Attached is my bank statement and proof of termination as evidence to my claims.

Kindly respond to my letter through my official address provided at the top of this letter. You can also reach me through this alternative phone number +62 75272 7527. Thank you in advance for being so considerate and understanding.

Yours Sincerely,

Stephen McMichael
+65 862 8626 726
[email protected]

Debt Forgiveness Sample Letter- Email version

24th Feb 2021

Rashid Abdi
643 Longstreet
LA 542, Los Angeles


Dear, Philip

My current income from Disability Pension is not enough for me to be able to make any payments towards my debt at this time. Due to my disability, I do not foresee any changes to my employment status or financial situation that would enable me to make the payments anytime soon.

I am attaching the case worker’s letter of support with a description of the condition and explanation of how this affects my ability to work and a copy of my medical records and bill statement.

I obligingly request that you forgive me for my debt of $872 as my condition precludes any employment, and current and future income does not support any debt repayment.

Kindly respond to this email at your earliest convenience—Thank-you for your understanding of my situation.


Rashid Abdi
643 Longstreet
+75 2752 862 276

Free Debt Forgiveness Templates

Finding the right words to properly express yourself in person when you are asking someone to forgive your debt may be hard at times- it is even harder when you have to put it in writing. This is why we are providing you with free easy to use debt forgiveness letter templates that you can download and use at your convenience. You can use the templates as they are or use them as a guide to help you find the right words to craft yours. Download today and get started on your debt forgiveness letter.












    Situations to Use Debt Forgiveness Letter

    One of the most substantial aspects of running a business is getting paid for the products and/or services you deliver to your customers. At times the clients may not be forthcoming with their payments due to various reasons. And after following up for a while, one may decide to forgive the debt and include it as bad debt or include it as a bad debt on their tax returns.

    Such situations may include:

    Financial hardship

    Loss of income is one of the most significant debt default causes. It is not always that our plans go right. For instance, someone may have taken a loan with all the intentions of repaying that loan on time from their salary. When they are faced with unprecedented situations such as the Coronavirus pandemic, they may end up having their businesses closed. As a human being, it is important to show compassion during such times. And considering that they had the intention to pay back the loan, you may consider forgiving them since they already have enough stress to deal with.

    Severe medical conditions

    For one to get money, they have to work. When they are faced with serious medical conditions that hinder them from working, they may not be in a position to pay their loan. One may consider listing the debt as a bad debt or a loss on their tax returns in such situations.

    Severe property damage

    Natural calamities, such as storms, heavy rains, fire, etc., may occur, resulting in loss or serious property damage. Having to recover from such damages is already enough- it is even tougher when one doesn’t have an insurance cover to help them recover from such damages. Since the debtor may not be in a position to repay their debt, you may consider forgiving them for enabling them to recover from the loss/damage.

    Jail terms

    When a debtor has been convicted of a crime and is now facing jail time, they may not be in a situation to think about your loan. Between getting their family in order and thinking about what will happen to them while in jail, the last thing that could cross their minds is repaying a debt. In such cases, especially when faced with long jail terms, you may also consider forgiving their debt.

    Military deployment and duty

    In as much as someone owes you money, it is already enough that they are doing their best to keep you and your family safe by serving the country in military duty. As such, you may consider forgiving them of their debt may be necessary to give them time to think about their work and not be stressed while working.

    Work relocation

    Other than military duties, one may be faced with a situation where they have to relocate for work or in situations where they have to detach themselves from normal places of residence. Such cases may impact their ability to service debt.

    Divorce or death in the family

     Death is one thing that we can’t control. When someone dies or divorces with their partners, there is bound to be a loss of revenue that used to be brought in by their departed “loved ones.” In such situations, one may consider debt forgiveness as an option as they may not be in a position to service the debt obligation.

    Failed business ventures

    Most people take loans to start or boost their businesses with the hope of getting some profit to help them repay their loans. It is, however, not always that such businesses succeed. If a debt was solely contracted to start a business, its repayment relies heavily on its success. If the business fails, then the repayment of the debt may be hugely affected.

    Reduced working hours

    People normally take a loan based on how best they believe they will be able to repay it after calculating their working hours and determining the total amount that they stand to get after working. This, however, may be affected when their working hours have been cut short due to unprecedented conditions.

     Loss of spousal income

    There are some debts that are contracted jointly as a couple, and their repayments are also pegged on the contribution of each party. When one party dies, the other party may not be in a position to service the debt on their own. In such situations, one may not have a choice but to forgive the debt and record it as a loss or bad debt.

     Personal or family medical bills

    When someone is faced with a condition where they have to either service debt or pay back a debt, the first thing they’ll have in their mind is to pay their medical bills. At times, the medical bills may be very high and may require them to sacrifice so many things to raise the amount- something that may hinder them from repaying their debts as agreed.

    Frequently Asked Questions

    Does debt forgiveness affect my credit score?

    Debt forgiveness happens when a lender forgives all or part of a debt that you owe. The process usually doesn’t affect your credit score- unless it happens in bankruptcy.

    Can I ask my creditors to write off my debt?

    This typically depends with the size of the debt. Most creditors are often willing to consider writing off their debt when they are convinced that your situation implies that pursuing the debt is not likely to be successful, especially if the debt amount is small.

    What percentage should I offer to settle the debt?

    Depending on the debt amount, the percentage that is often accepted in debt settlements is 30-80%. So, when offering to settle a debt, it is important that you keep the percentage within these rates.

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