This article was co-authored by Lyle Solomon, JD. Lyle Solomon is an Attorney and the Owner of the Law Office of Lyle D. Solomon. With nearly three decades of experience, he practices civil law and specializes in consumer debt relief services and bankruptcy. Lyle is also the author of Think Different! Save More! He holds a BA in Criminal Justice from The University of Nevada, Las Vegas, and a JD from The University of Pacific, McGeorge School of Law.
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A settlement proposal most commonly refers to an attempt by a person in debt to reduce or eliminate their debt by proposing an alternative to paying the full debt to the creditor. Proposing a settlement is a good idea for someone who is considering bankruptcy or who feels like they can pay some, but not all, of a debt. Creditors are often open to settlement proposals as they offer an alternative to settling a debt that might otherwise go unpaid. The steps below will guide you on how to write a settlement proposal and seek good terms for a partial or full debt reduction.
Steps
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1Collect all information on your debts and sort it by date.
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2Decide which debt you want to settle and the amount you can pay. You should choose a debt that is long overdue and which the creditor might reasonably expect will not be paid back.[1]
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3Decide on a figure for your settlement. In general, a debt settlement should be about half of the total amount owed.[2]
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4
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5Indicate the purpose of your proposal, including which debt you want to pay off and the amount you are prepared to pay.
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6Describe the details of the debt, including the date it was taken out, any payments you have made, interest accrued, and other details. Be extremely clear about each party's responsibilities and key dates.[6]
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7Explain the reasons why you cannot pay the debt and why you are proposing a settlement including details about other debts.[7]
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8Indicate how this specific debt fits into your overall financial picture to convince the creditor that you are making the best effort to pay. If you are considering bankruptcy, indicate so here.
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9Propose payment terms, including whether you are seeking a cancellation of the debt or simply a debt reduction and offer a payment schedule. Include specific dates for each action you'll take or each action you expect the other party to take.[8]
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10Request, in exchange for a debt settlement, that the creditor remove mention of the debt in your credit report and make a good effort to improve your credit rating.
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11Close the letter by reiterating that you are not able to pay off the debt, and that this settlement proposal represents your best effort to give the creditor something.
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12Request that the creditor respond in writing to your proposal, indicating their acceptance, refusal, or request for new terms.
Things You'll Need
- Information on debts and accounts
- Contact information for creditors
References
- ↑ https://www.nerdwallet.com/blog/finance/debt-settlement-negotiations/
- ↑ https://www.nerdwallet.com/blog/finance/debt-settlement-negotiations/
- ↑ Lyle Solomon, JD. Attorney. Expert Interview. 18 August 2021.
- ↑ https://www.legalzoom.com/articles/get-your-finances-on-track-with-a-debt-settlement-letter
- ↑ Lyle Solomon, JD. Attorney. Expert Interview. 18 August 2021.
- ↑ Lyle Solomon, JD. Attorney. Expert Interview. 18 August 2021.
- ↑ https://www.legalzoom.com/articles/get-your-finances-on-track-with-a-debt-settlement-letter
- ↑ Lyle Solomon, JD. Attorney. Expert Interview. 18 August 2021.
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