Debt Settlement Letter

Formats:

Overview

Making a realistic off to settle a debt can often avoid the need for expensive legal action.

• Our debt settlement letter template is drafted by a Debt Recovery Solicitor.
• 72% of debt claims are settled without litigation.
• You are more likely to achieve payment of your debt by making an offer of settlement.
• Use our template as many times as required to manage your creditors.

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Debt Settlement Letter

In the debt recovery process there are four steps you will need to follow before you issue court proceedings to obtain payment. The first step is sending the Debt Reminder Letter that offers the debtor seven days to make payment. It is a gentle but firm reminder that the money you are owed is due to be paid. The second step is the Late Payment Chaser Letter that again reminds the debtor of their obligation to pay the money owed. This second letter is a little more forceful and direct about what could happen if payment is not made in a further seven days. After step two you have given the debtor at least fourteen days to make payment. You can then send out the Debt Settlement Letter.

The Debt Settlement Letter sets out a proposed settlement between you and the debtor and shows that you are willing to compromise on the payment the debtor owes you in order to resolve the issue. In essence, the Debt Settlement Letter is an invitation letter to open up negotiations with the debtor to settle the debt. Such a settlement can involve requesting part payment only or payment by instalments.

In the United Kingdom more than 72% of debt recovery issues are solved outside the courts through this debt recovery process. The debt recovery letters help the debtor to understand their options and encourage them to make payment. However, it may still be necessary to bring a court claim against debtors who ignore the letters and fail to negotiate terms of settlement.
 
It may well may be to your advantage to use the Debt Settlement Letter template supplied here. Realistically a debtor may not have the funds to make full payment and so a settlement can result in you receiving at least a partial payment and prevent you from wasting more time and money on the matter.

You should be realistic in your offer. The letter can simply be a tool to open up negotiations or can be used to explain explicitly what payment you require. A debtor can also use the Debt Settlement Letter to accept or make an offer that they can afford to honour.

Using our Debt Settlement Letter

The template on this site can be customised to suit your individual needs. You can change the wording of the letter and the offer in it depending on your requirements. The template is intended to get you started and show that you are willing to negotiate and strike a deal to attempt to resolve the matter.

Associated Documents

The other debt letters in this section will enable you to properly chase payment of outstanding debts.