Debt Settlement LettersWritten by Jill Morrison
Debt settlement letters offer a compromise for debtors and creditors or collectors. A debtor who is unable to meet his payment obligations may write a letter offering a settlement amount. If the offer is accepted, the debt will be considered paid in full for substantially less than the original amount owed. This is a useful solution for the problem of improving a poor credit report.
Potential Benefits of Debt Settlement Letters
If they receive an offer, many creditors or collectors will settle a debt for 40 percent to 60 percent of the amount originally owed. Sometimes, it takes more than one letter to reach an agreement. Creditors often make counter offers. Settling a debt does not necessarily mean that it will be removed from a credit report. Collectors will usually agree to remove a debt from a report for a higher payment percentage. An offer of 60 percent to 80 percent of the amount owed will usually be accepted.
Debt settlement letters provide a quick and reliable method of improving a credit report. Sample wording for specific situations is available online. The letter should reference an account number and offer a dollar amount to settle the account. Payment in full may be offered in exchange for written confirmation of acceptance. Another option is to offer one immediate payment with additional payments at specified intervals until the obligation is met.
Settlement services have the expertise to contact creditors and obtain the best possible settlement deals. They will give advice about legal and tax obligations involved with any debt settlement. They have built strong relationships with many creditors which could yield more positive results than debtors might obtain on their own. Debtors should consider this option to help them regain control of their finances.