Settlement Letters To Creditors - Advice on Writing To Your Creditors To Settle Debts

When you are in debt, knowing how to deal with your creditors properly can make the difference between being able to find your way out of debt and sinking deeper into it. It really is a vital skill and something that is far too frequently overlooked. Many people with money problems turn to consolidation loans or debt management plans, but these are rarely a better solution than negotiating with your creditors. Unlike the other two, negotiating with creditors costs you nothing.

There is a well established system for dealing with all types of debt problems, no matter how serious. Go to any unbiased debt counsellor who has nothing to gain personally from advising you, and they will in most cases guide you through a process of negotiation with your creditors to reach an agreement for settling your debts on terms you can afford. Any other solution will almost certainly involve borrowing more money (consolidation loans) or spending money on fees for someone else’s help (debt management plans, IVAs, etc).

The tried and tested system for dealing with your debts properly is to communicate honestly with your creditors to explain your situation, put your debts in priority order, work out your exact financial situation and then make offers to your creditors to agree repayment terms. So the first step is to write to all your creditors to tell them why you are in the predicament you are in and why you are not in a position to pay them back on the terms you originally agreed. Being upfront like this is crucial. Whatever your relationship with creditors has been up to this point, now is the time for you to take the lead in being honest and professional in all your dealings with your them.

In your letter, tell each of your creditors that you are seeking help to address your situation and that you will be writing to them again with offers of payment and a personal financial statement. Ask each creditor to confirm exactly how much you owe and get them to list any penalties or arrears that have also been applied. It is sensible to also ask them whether any insurance policy is in place with regard to the debt.

When you get your replies back from creditors, make sure you have an organised system for keeping track of all correspondence. The paperwork could become quite substantial over a period of time, and you need to keep absolutely everything and know where to find it quickly and easily. Check the letters to receive back and see if there are any penalty charges or extra interest listed. If there are, it is worth contacting the creditor to see if they will at least waive these extra charges and stop accruing any further ones while you try to reach a settlement. You may be surprised how often this works, and there is nothing to be lost by trying.

The next stages in negotiating your settlement involves separating your debts into priority creditors and secondary creditors, creating a financial statement, then writing to your creditors again with offers of settlement. It is a process that is proven to work, and all that is required is some guidance on the process.

Read advice on how to negotiate debt.