There are many reasons why someone may not be able to pay their debts. If this is the case, it is in their best interests to send a debt letter to their creditors as soon as they realize they will not be making payments. Many creditors appreciate an honest and timely declaration from a borrower and will be willing to work with the individual to find a solution to their debt.
It is not recommended to discuss debt payment over the phone because putting the proposal in writing provides the debtor proof that they are trying to resolve the situation. A creditor could agree to certain conditions over the phone and later want to change them.
There are several different ways consumers can deal with debt they are having difficulty paying. They can offer a one-time payment to write off the debt, they can defer making payments for a specific time period and they can ask that the debt be forgiven.
It may be embarrassing to write a letter, because the consumer has to tell about their sad situation and request help. However, the hardship is not the only important thing about request. Most creditors are happy to get any payment on unsecured debt and will view the request favorably.
A letter to creditors offering reduced payment is requesting that the debt be considered repaid with a specific offer from the borrower that is not the full amount of the debt. In this type of letter, it is recommended that the borrower put in details about their hardship. Some of the most common hardships are:
• Unable to work due to illness
• Unexpected medical bills
• Loss of job
• Reduced income
• Failed business
• Death in the family
• Job relocation
• Military duty
• Property damage
The consumer should not believe that they deserve a settlement. The creditor will decide if they deserve one or not. The letter is to convince the creditor to accept a settlement. The consumer should strike a balance between giving too much hardship information and not enough. Too much information could work against the consumer and too little may look like there really isn’t much hardship. There are three main things that need to be included in the letter:
• Why the consumer could not afford to pay their debts and any steps they have taken to resolve the matter
• The consumer’s current financial situation and other assets
• How much money the consumer can offer as a settlement
Some tips for writing the debt letter:
• It should be on one page
• It should give financial information such as income, rent, and food
• It should be courteous and polite; after all it is requesting help
• It should give some personal details such as medical conditions
• For a settlement letter, a clear offer should be given
• If the debts are old, creditors are usually happy to accept any offer of payment
• The letter should be addressed to the person in charge of the consumer’s account
• A written agreement should be requested
If the consumer is not in a position to make any payment on their debt, they may request to have the debt forgiven. This is usually only possible if there is no way the creditor can collect payment. For example, they cannot enact income garnishments on Social Security benefits, workers’ compensation or unemployment payments. This letter should conclude with an honest apology for not being in a financial position to pay as agreed. All types of debt letters should include a request for a response in writing.
By Andre Bradley