How to Write a Settlement Proposal

Опубликовал Admin

24-07-2021, 23:10

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

Collect all information on your debts and sort it by date.
Decide 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.
Decide on a figure for your settlement. In general, a debt settlement should be about half of the total amount owed.
Begin your proposal by addressing your letter to the creditor and including the name on your account and/or account and invoice numbers.
Indicate the purpose of your proposal, including which debt you want to pay off and the amount you are prepared to pay.
Describe the details of the debt, including the date it was taken out, any payments you have made, interest accrued, and other details.
Explain the reasons why you cannot pay the debt and why you are proposing a settlement including details about other debts.
Indicate 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.
Propose payment terms, including whether you are seeking a cancellation of the debt or simply a debt reduction and offer a payment schedule.
Request, 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.
Close 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.
Request that the creditor respond in writing to your proposal, indicating their acceptance, refusal, or request for new terms.

Tips

Be forthright and honest about your financial situation. Although creditors will want to have some of your money rather than lose all of it through an unpaid loan, they will also refuse a proposal that seems in bad faith or which represents an insufficient effort pay off the debt.
A good debt settlement proposal will offer to pay from 40 to 60 percent of the total debt. Make sure that you offer somewhat less than you are prepared to pay, as you may need to negotiate with your creditor, increasing the amount of your payment in exchange for more generous payment terms or an improved credit rating.