Letter Requesting Reduction of Debt — Settle Debt for Less Than Owed

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Request the reduction of the debt owed. Once signed, it is a binding contract for the settlement amount.

Debt settlement is the process by which you are trying to come to an agreement with a collection agency regarding the amount of debt you owe. You want to negotiate a settlement so that you end up paying less than you owe. You can use this sample letter to send it to a collection agency confirming an offer to settle a debt and the amount the debt was settled for. It is very important this type of settlement is in writing and signed by all parties involved.

We have more sample debt settlement letters to handle a variety of situations.


(Insert Collection Agency Name) referred to hereafter as COLLECTION AGENCY and (Insert Your Name) referred to hereafter as CONSUMER, agree to resolve the matter of the alleged debt, originally held by the ______________________ Company, hereafter referred to hereafter as the CLIENT. CONSUMER hereby agrees to settle this alleged debt claimed by COLLECTION AGENCY on the following terms and conditions:

The COLLECTION AGENCY certifies that it is legally authorized to act on behalf of its CLIENT and that any agreement that the COLLECTION AGENCY makes on behalf of its CLIENT is legally binding on the CLIENT.

The COLLECTION AGENCY and the CONSUMER agree that alleged debt is $_____________. While the CONSUMER feels that validity of the debt has not been proved by the COLLECTION AGENCY, the parties agree that the COLLECTION AGENCY shall accept the sum of $____________ as full payment on the debt. The acceptance of the payment will serve as a complete discharge of all monies due, and the COLLECTION AGENCY agrees to consider the debt paid in full and agrees to not take further action to collect on the alleged debt. The payment shall be made in the form of a cashier’s check or money order.

Upon payment of the $__________, the COLLECTION AGENCY agrees to remove any listing or information that the COLLECTION AGENCY may have placed on the CONSUMER’S credit report. The COLLECTION AGENCY agrees to never at any time in the future place any information on the CONSUMER’S credit report.

The CONSUMER feels that the negative information on CONSUMER’s credit report is damaging and while the exact estimation of the damage is not currently known, the CONSUMER estimates it to be $10,000 (ten thousand dollars). Should the COLLECTION AGENCY fail to remove the listing or reinsert it at a later date, the COLLECTION AGENCY agrees to award liquidated damages of $10,000 to CONSUMER.

This compromise is expressly conditioned upon the payment being received by (insert date). If the CONSUMER fails to pay the compromised amount by (insert date), this contract will be immediately terminated.

The person signing this agreement, __________________________________, hereby declares that he/she is authorized to act as an agent of the COLLECTION AGENCY.

This Agreement shall be binding upon and inure to the benefit of the parties, their successors, and assignees.

Dated: _______________

Signature: ____________

Legal Representative of (Insert Collection Agency Name)

Signature: ____________

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