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Writing a Debt Settlement Offer Letter (8 Best Samples)

A debt settlement offer letter is a written proposal that a debtor or his attorney sends to a creditor or a debt collections agency to offer a specific amount of money to forgive a debt.

A creditor may also send a debtor an offer letter. Usually, debt settlement offer letters are sent when a debt is past the due date and has probably been moved to a collection agency, and the debtor is unable to pay all the debt they’ve accumulated. 

These letters can also be used when a debtor can afford to settle the monthly installments but knows these payments will drag on forever, and it would be financially beneficial to settle the debt for less than the total amount payable. In most cases, those who opt for debt settlement are doing so because they can’t pay off all the accumulated debt. Therefore, they offer a decent portion of the debt owed upfront in exchange for the account to close in full. Sometimes, the debtor can receive a letter from the creditor or a debt collector with a debt settlement offer.

An offer from a debt collector should comprise of the following details:

  • A reference of the account using the account number and name
  • A list of the alleged current debt balance
  • The amount offered upfront in exchange for the account to be settled in full and how it is to be paid.
  • The date you wish to pay the amount or receive a reply to the request to settle the account.
  • A clear statement indicating that by paying the settlement before the due date, the account will be closed and the debt released.

Understanding a Debt Settlement Offer Letter

Before understanding whether you should reach out to your creditor with a debt settlement offer, it is important to understand the benefits of settling a debt. Settlements, while seemingly beneficial to the debtor getting to pay a portion of the total debt owed, are just as important to the creditors or collectors.

In many instances, the credit collectors want to settle the debt as much as you want to or even sometimes more than you do.

Here are some of the advantages of sending a debt settlement offer letter to your creditor or debt collector:

  • Settling debt is beneficial to the collector because it implies that they will get a significant part of the total amount owed. As you may already know, the odds of getting an account in collections paid are not good. It is more likely that the debtor will file for bankruptcy and the debt automatically discharged. This means that the debt collector risks getting nothing out of what they are owed. And even if the debtor does not file for bankruptcy, it will still cost a lot of time and money trying to take legal action against the debtor to collect the debt.
  • Sending a debt settlement offer letter has its advantages and drawbacks. The extent to which you may be affected depends on your current situation. For this reason, you should make an offer after consulting with your attorney. Even if the creditor sends you an offer to settle, make sure to run it by an attorney to confirm if it is legitimate.
  • Writing a debt settlement offer letter can be advantageous to a debtor if he/she is going through financial hardships—most people who are unable to afford to settle a debt end up filing for bankruptcy. While settling is not always a guarantee, it may put the debtor in a better financial position. And help avoid bankruptcy.
  • Given that a debt settlement request is accepted, debt settlement amounts usually settle for around 50% to 80% of the total balance owed. This can alleviate some financial stress that a debtor may feel about paying off debt.

Sending a debt settlement offer letter has its advantages and drawbacks. The extent to which you may be affected depends on your current situation. For this reason, you should make an offer after consulting with your attorney. Even if the creditor sends you an offer to settle, make sure to run it by an attorney to confirm if it is legitimate.


While some people may argue that the advantages of sending a debt settlement offer outweigh the drawbacks of drafting one, others may be limited when it comes to other options and may be more willing to take the risk. However, before you embark on drafting a debt settlement offer letter to your creditor, it is essential that you understand the cons associated with such agreements.

The cons of writing a debt settlement agreement include;

  • Making a debt settlement offer to the creditor or debt collector is never a guarantee that the debt will be settled and released. If there are no agreements reached, you may end up paying more than what you initially owed due to missed payments, and you may be charged late fees and penalties. If you hire a professional to help you with a debt settlement agreement, you may owe them fees and payments, and they may sue you. All this is costly.
  • Typically, settling a debt can appear as a wrong financial move and negatively affect your creditworthiness. Missed accounts may still appear in your credit report, even if you were negotiating your debt settlement at that given time. Moreover, there is a chance that your account shows up as a debt settlement on your credit history. This may affect your credit health status as other lenders may see you as an unreliable candidate in the future.

How to Write a Debt Settlement Offer Letter

Writing a debt settlement letter requires you to be explicit and detailed. Treat the letter as though it is a contract between you and the creditor. While writing the debt settlement offer letter, make sure you include all important information.

The information includes:

Write your address information as the header of the letter

Provide your personal information and account number on the header of the debt settlement offer letter for easy identification. Your personal information includes your full legal name, mailing address, and current date.

Outline the amount you wish to pay as settlement

The total amount of money that you offer to pay as settlement should be recorded so that your intentions are clear to the debt collector. Therefore, write how much money you are willing to pay to settle the debt and what you expect in return. If you want to propose a reasonable settlement offer, consider offering around 30% of the original debt. This way, you will create a baseline for the negotiations that the debt collector will bring forth.

Give a reason why you are unable to settle

To have your debt settlement offer proposal approved, your creditor must be convinced that you genuinely can’t afford to pay off what you owe them. This means that you have to elaborate on why you cannot afford to pay off your debt and how this will be beneficial to you financially. Examples of financial hardships that you can include in your debt settlement offer letter include; serious injury due to an accident, unexpected loss of work, and environmental disasters. Based on the financial hardship you have provided in your debt settlement offer letter, the debt collector may ask for documented proof. Make sure you include it if necessary.

Write the account you wish to pay on and the date

Once you have written the amount you wish to offer as settlement and have provided a good enough reason why you can’t afford to pay the full debt in your debt settlement offer letter, provide the account you wish to pay on and the reliable contact information. After that, add the date you wish to pay the amount or receive a reply to the request to settle the account if the creditor agrees to the terms of the debt settlement agreement.

Conclude the letter

End the debt settlement offer letter by adding a call-to-action plan followed by an appropriate closing tag and your signature, respectively.

Sample Debt Settlement Offer Letters

Following are a few debt settlement offer letter samples for you to understand the sentence structuring and the tone of the letter well:

Sample letter 01

Dianne Jonson,

4th Street 345 avenue,


March 21, 2021

RE: Collections Letter dated January 4, 2021

Dear Skywave Debt Collections Agency,

This letter does not grant my acceptance of the total debt owed, but it provides an offer at which I would be willing to compromise and pay to remove this claim. The total amount I am willing to offer is $1000.

Suppose your organization accepts this offer, I would make the above-stated payment immediately through your bank account number provided. Please feel free to contact me via my email address provided below:

Email: [email protected]


Dianne Jonson.

Sample letter 02

Tyler Young,

6789, green park street, Arizona

+1 234 001 1045

March 21, 2021

Account number 7902021

Reliable Loans Credit Limited company,

00600 wood Avenue, Arizona

Dear Reliable Loans Credit Ltd,

I am writing concerning the amount of debt on account number 7902021. Due to an inevitable financial hardship, I cannot afford to pay off the debt in full. I was recently involved in a car accident that left me incapacitated due to severe injuries. Because of this, I am left with large hospital bills that need to be cleared, which has drained me financially. Besides, I also lost my job.

I’d like to propose an offer to settle my debt for $890.00 as a final settlement. In return, I am requesting you to remove the late payments on my credit report and freedom from any liability associated with this account’s debt. I expect this information to appear on my credit history and the account reflecting paid in full.

If you accept this request, kindly send me a written signed agreement. Afterward, I will pay the agreed amount within two business days of receiving the written agreement. Feel free to reach me through the contact information provided below:

Cell phone number: +1 234 001 1045

E-mail: [email protected]


Tyler Young

Free Debt Settlement Offer Letter Templates

Writing a debt settlement offer letter may be worth your while if you find yourself struggling due to financial hardships. Writing a good debt settlement offer letter to convince your creditor to forgive part of your debt may seem like a daunting task to most people, and it can make you nervous. However, this shouldn’t worry you because we have provided you with free and premium debt settlement offer letter templates that you can download, quickly customize and send to your creditor while professionally meeting your specific purpose.







    Although settling a debt account is considered negative by many people, it won’t hurt you as much as not paying at all. Suppose you are planning to make a major purchase, for example, buying a home. In that case, you may be required to either settle or clear any outstanding delinquent debts before you can qualify for a loan from any financial lending institution. If paying the debt in full is not an option due to financial constraints, consider settling the account because it is more beneficial to your financial health than letting the debt go delinquent or, worse, to default.

    Frequently Asked Questions

    Is it better to settle a debt or pay it in full?

    If possible, it is always best if you pay your debt in full. This is because your account will be reported to the credit reference bureaus as settled in full. If you settle your debt and you don’t repay the full amount owed, the account will be reported as paid for less than the full amount owed. This will negatively affect both your credit report and credit score.

    What percentage should I offer to settle a debt?

    To offer a good debt settlement proposal, offer a specific dollar amount of about 30% of the total amount owed. This will create a baseline for negotiations as the creditor will probably counter with a higher percentage. If anything above 50% is proposed, consider trying to settle the debt with a different creditor or put the money in savings to help pay future monthly bills.

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