How to Write a Debt Negotiation Letter

If you’ve made the decision to self-negotiate a debt instead of hiring an attorney or a debt consolidation company to do the work for you, here are a few tips and steps to get started. Remember that creditors may not be legally required to help you out, but if you prepare your case and have money in the bank to achieve the settlement, creditors may be encouraged to work with you.

Instructions

Difficulty: Easy

Things You’ll Need:

• Info on debt terms and conditions
• Debt counselor/lawyer (optional)
• Filing system for debt correspondence
• Money to pay 70% to 80% of debt
• Credit report check to ensure that resolution shows up on your report
• Computer/printer, envelope, and stamp

1. Research the terms and conditions of your debt. Know the fees, surcharges, taxes, and interest rates that apply. Annual processing fees may be associated with the debt.
2. Tally up your total amount owed, including fees and taxes.
3. Gather together enough funds to settle. The money is not to send with your letter, but for giving more weight to creditors for consideration of your request. You don’t have to pay out the full amount of the debt, but be sure you have at least 70% to 80% of the balance. Creditors won’t take you seriously if you offer too little or if you offer to pay in increments.
4. Make your settlement request in writing. Make your first offer reasonable but relatively low so you can climb up if the creditor denies your request. If possible, have a lawyer or at least a debt negotiation counselor look over your letter to check for any inconsistencies or unnecessary items.
5. If the creditor agrees to your request, pay promptly and get written confirmation of the receipt of payment. If the creditor wants to meet you halfway, talk to your debt counselor to see what’s fair.
6. Keep track of all correspondence with your creditors, as promises made over the phone are hard to verify. Leaving a paper trail is good in that it provides documentation of your efforts and helps you to find information more quickly should a question or problem arise.
7. Follow up on any agreements made to ensure they have been completed.
8. If your creditor clears your debt, make sure that the clearance appears on your credit report within two to three months.

Tips & Warnings

• While it may be tempting to threaten creditors by suggesting that you will file bankruptcy if you don’t get what you want, this tactic can lead to the creditor being less willing to negotiate than they would otherwise.
• If the creditor is unwilling to negotiate, you may want to indicate your willingness to force the creditors to validate their debt claim (demonstrate legally that you owe them money). This process is often sluggish, and many creditors don’t want to go through the hassle.
• Pay via check or money order. Never send cash.
• Do not assume your credit rating will go up soon after your creditors clear your debts. Check back with all three bureaus (Experian, TransUnion, and Equifax )to make sure that your FICO score has been appropriately adjusted pursuant to your clearance.