Creating a proposal offer to your creditors regarding the settlement of debt is not at all an easy task. After all, you are trying to negotiate a deal where the creditors apparently have to bear some loss while you get the benefits. You have to make the offer in a way to convince them that you are going through a very bad financial situation and that your proposal is in the best interest of both the parties. Following is a detailed overview on how to go about it.

Have A Counter Offer Ready In Case Your First Proposal Gets Rejected

The first proposal is often rejected by the creditors, but the good news is that you can always make a second offer. Prepare an initial settlement offer, explaining the repayments terms that you can afford. You can propose to pay certain percentage of the total outstanding balance either in installments or in one lump sum. Considering the very fact that the creditors are likely to reject this first offer, it is always better to keep the percentage low. For example, you can offer to pay 30% of the total outstanding dues in final settlement of debt. But, you must have a counter offer ready in case your first proposal is rejected. In your counter offer, you may tell them that you will have to raise the percentage to say 40% or even more. It is entirely up to you to decide how high you can go and what kind of repayment terms you can afford.

Structure Of The Letter

You must include a subject line referencing your account number and address the letter to your creditor along with their contact details. You also need to provide the basic information about you, such as your name, address, telephone number, and email address. It will be better if you also describe your financial situation briefly. If you do, do not forget to attach supporting documents. Just writing that you are going through a financial crisis will not do any good; you must provide documents in proof to convince your creditors.

Reporting Of Debts To Credit Bureaus

While you are writing the proposal for the settlement of debt, you must also suggest the ways on how you want the debts to be reported to the three major credit bureaus. The debts can be reported in various ways, such as “paid in full”, “paid but not as agreed”, or “settled”. You will need a written record if the creditor agrees for the proposed way of reporting.

If your creditor accepts the proposal by signing it, you can send them a certified check (it should never be a personal check) for the payment. Do not forget to write a memo line – “Cashing this check constitutes payment in full”. Keep a copy of both the check and the letter in a file. The creditor should also provide a return receipt regarding the  debt settlement.