The Practical Way of Writing A Debt Settlement Agreement Letter

Anyone who has debt is obliged to pay it, the company is no exception. To resolve debt problems in official documents, a creditor needs to write a letter specifically addressed to the debtor. The letter, which is called a debt settlement agreement letter has functioned as a contract agreed by both parties regarding the debt that has not been settled. You have to notice several important elements to result in a professional letter.


How To Write An Agreement Letter for Debt Settlement?

The first thing you should observe before writing a debt repayment letter is to determine the most appropriate format. After that, you must also have all complete information regarding the creditor and debtor.

Creditor and Debtor

You must include complete information about the creditor including the address of the company that lent the debt. Then, include some important information about the debtor, related to the full name and address.

Debt Details

Like a letter that discusses the details of the debt, of course, your format must also contain the amount of debt, the validity date, interest, and the agreed maturity period. If necessary, you can write in detail about the debt that must be paid each month. Apart from that, the next important thing is to sign the agreement letter which means that it has been agreed by both parties.

What Is The Format of Debt Settlement Letter?

You must use a business letter format to be able to write a proper debt settlement agreement letter, as well as write an agreement letter like a contract. Your letter must include several important things such as new payment terms, consequences if the debtor is unable to pay, and the original debt.

You must also explain the method of payment and due date in detail, including the method of payment requested. However, this letter can be the most effective way for both parties because it can prevent misunderstanding in the future.

Debt Settlement Agreement Letter Sample

You can write a debt settlement letter in a standard and general format. In essence, your letter should be clear and detailed to prevent ambiguity. Below is an example of a letter that may help you to get a viewpoint:

Dear Mr. Gates,

We know that there are urgent matters that prevent you from being able to pay all your bills to us. Therefore, please agree to the following terms to pay off your debt.

Current debt: $ 1986.30 (on the attached bill) for account number # 7000765. The actual due date was December 22, 2020.

ABC Finance agreed to reduce the amount owed from $ 1986.30 to $ 1500, which you must pay in three payments of $ 500 at the beginning of the month every 5th. The first payment is due on January 5, 2021, so the last payment will be March 5, 2021. You can pay it in cash or by check to our office: ABC Finance c / o Dr. Nick Brown, 654 Cator Ave, Baltimore.


January 5, 2021: $ 500

February 5, 2021: $ 500

March 5, 2021: $ 500

Total: $ 1500

If the debtor is unable to complete one of the payments, the consequence is that the total debt will be due soon.

This debt settlement agreement received approval from both parties and is valid on the agreed date after the two parties signed.

Thank you for your understanding.

Laurent Parker

Manager with Nick Brown’s office

I have read and understand the contents of this agreement and accept all the terms.


Dave Jackson


ABC Finance

In conclusion, there are several detailed elements that you must include in your debt settlement agreement letter. Hopefully, our brief explanation about the format letter above can help you to write your letter.




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