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Settlement offer letter

Debt settlement offer letter template

Make a written offer to settle a credit card balance for less, and ask for the agreement in writing before you pay.

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How this works

  • The letter states the balance and your offer, as one payment or monthly payments, and asks for a written agreement before any payment.
  • It asks the company to confirm that the payment settles the account in full and how the account will be reported.
  • It notes that canceled debt may be reported to the IRS on Form 1099-C; the insolvency worksheet shows whether some of it may be excluded.
  • Card companies don't have to accept an offer, and in some states a payment on an old debt can restart the time limit to sue.
  • This is a template with information, not legal advice. What you type isn't saved or sent anywhere.

Sources

  1. IRS: about Form 1099-C, cancellation of debt
  2. IRS Publication 4681: canceled debts
  3. FTC: how to get out of debt

Awaiting expert reviewPreview build. Estimates only; not financial, tax or legal advice.

Common questions

Can I settle credit card debt myself?

You can make an offer directly to your card company. It doesn't have to accept, and settling can hurt your credit.

Why get the agreement in writing before paying?

A written agreement records the amount, the payment dates and that the payment settles the account, so there's no dispute later about what you agreed to.

Is forgiven credit card debt taxable?

It can be. A lender that cancels $600 or more of a debt generally files Form 1099-C, and canceled debt can count as income. If you were insolvent just before the cancellation, part or all of it may be excluded; the insolvency worksheet walks through it.

Can paying an old debt restart the clock?

In some states a payment on an old debt can restart the time limit to sue. If the debt is old, check your state's rules or talk with an attorney before you pay or sign anything.

Is the information I enter saved or sent anywhere?

No. What you type stays on this page. It isn't saved or sent anywhere, and it clears when you leave or reload the page.