For example, if you owe $10,000 USD, consider making an initial offer of $3,000 USD. Thoroughly examine your current income and household expenses in order to figure out what amount of settlement offer you can make. Debt settlements are usually lump-sum offers (paying the agreed-upon amount all at once to satisfy the debt). You can definitely try making a settlement payment plan—for instance, cutting a monthly debt payment from $1,000 to $500 USD—but this has lower odds of success.

January 10, 2022 [blank line] John W. How 100 First St. Anytown, KS 12345 Ph: 123-456-7890 [blank line] MegaBank Inc. 555 Park Ave. Big City, KS 56789 [blank line] Re: Account #987654321 [blank line]

Dear Sir or Madam: [blank line] This letter refers to the outstanding debt associated with the account number listed above. I am unable to pay the outstanding debt balance in full due to unforeseen financial difficulties. [continues below]

[continued from above] Namely, my restaurant business never recovered after the forced closure early in the Covid-19 pandemic, and I had to close for good in August 2021. This has resulted in a substantial decline in my monthly income. [blank line before next paragraph]

I propose an offer of $4,000 USD, or a similar, mutually agreed-upon amount, as a full settlement amount for the outstanding debt balance. [continues below]

[continued from above] In return, I request that you report to all the major credit bureaus that the account is “paid in full” or “paid as agreed. ” I also request that you remove from the account file any records of missed payments that occur on or after today’s date (January 10, 2022).

[continued from above] Lastly, I request that the debt on this account be closed with this agreement and that I have no further liability regarding the debt. [blank line before next paragraph]

Should you find these terms acceptable, I ask that you send to me a written and signed agreement that lays out these terms and your acceptance of them. [continues below]

[continued from above] Upon receipt of your signed acceptance, I will pay the agreed-upon settlement amount within 10 days by paper check (to your preferred address) or electronic check (to your preferred account). [continues below]

[continued from above] Please notify me of your decision, by mail, within 14 days of your receipt of this letter. [blank line] Sincerely, [signature of John W. How] John W. How Note: Use Certified Mail so you have confirmation that the creditor received the letter on a specific date.

They might accept all your terms except the lump-sum amount, for instance—they might request $6,000 USD instead of $3,000. If you agree to their terms, ask them to send a written and signed agreement based on those terms. If you disagree, send another letter (similar to your first) with your counter-offer (such as $4,500 USD). Keep going back-and-forth as needed until you reach mutually-acceptable terms. Talk to a credit counselor or an attorney if you’re having trouble deciphering the fine details of the creditor’s counter-offer.

Keep all the documents on file for at least 7 years for legal and tax purposes.