Keys to Writing a Debt Settlement Letter

Writing a debt settlement letter is not necessarily something that can only be done well by an expert like a lawyer or debt reduction company agent—you can do it too.

In fact, it is completely within the skills and power of the average person to write their own settlement proposal to their creditor.

Get it Right

Here are a few key elements to keep in mind as you put together a letter:

• Keep the creditor's best interests in mind, they will only agree when it benefits them.
• Be firm to show you’re serious, but don't come across as aggressive or demanding.
• Ask for a better deal than you really expect to get, so when the negotiations take place you'll still be close to your real goal.
• Never make an offer you can’t deliver. At the end of the day you need to have cash in hand before offering it.

Now let's take a look at each of these elements in greater depth and see how important each one is to your success.

Make it Benefit the Creditor

First of all, it is very important to keep the creditors best interests at the front of your mind as you proceed in writing a debt settlement letter.

This one should be a fairly simple one to understand. Don't try writing a debt settlement letter that looks for sympathy—you won't get any here. No one at the credit company is going to feel sorry for you, they are all about money.

Creditors are businesses with one major goal—increasing profits. Your letter will be much more effective if you appeal to the interests of the company, rather than ramble on about how hard your own life is. Let the company know in no uncertain terms that if you can't settle the debt for less than the full amount, you will have no other option than to declare bankruptcy—in which case, there will be a chance they get nothing. Now that is a powerful motivator.

Set the Right Tone

Now let's talk about the tone of the letter. If you come across as silly and frivolous, your letter is likely to be ignored outright. You need to write in a firm, sensible and balanced tone. Let them know that you are reasonable and looking for a solution that suits both parties. Avoid slipping into a threatening tone that implies the creditor has to agree to your proposal. They don't.

Be Ready to Negotiate

This brings us to an important technique that you can use to help you write your letter. When you fire off a debt settlement letter, your first proposal usually will not be accepted straight away. Instead, you are likely to receive a rejection or a counter proposal. This is why you should initially ask for a settlement that is more generous than what you actually expect to get. That way, as you negotiate you can appear to be making concessions, when in fact you are moving toward the real figure you were hoping to settle for in the first place. Be prepared to go through several counter offers before you reach a compromise.

Follow Through to the End

And of course, last but not least—if you are going to make a debt settlement proposal, make sure you can actually follow through with whatever deal you put on the table. There is no point offering a lump sum payment to settle a debt when you don’t actually have immediate access to the cash. Don’t rely on being able to sell an asset in time, you need to have liquid cash in hand to pay for the settlement deal before you enter into any written agreements with your creditor.