Although the economic crisis is now officially behind us, many people continue to experience significant economic pressure. If you are facing a lot of debt, you may feel like bankruptcy is the only way out. However, before you file for this, you may want to consider writing a hardship letter debt settlement instead. Typically, this letter is sent for real estate debt, but it can actually be used for any kind of debt.
Avoid a Debt Management Agency If Possible
Experiencing serious financial difficulty is highly distressing and you may be feeling overwhelmed. It may be tempting, therefore, to contact a debt management agency to do the work for you. While these companies have their place in society, you should always consider doing the work yourself first. This is because these companies do not work for free, and all they really do is write on your behalf, collect your money, and distribute it among your creditors. These are things that you can do yourself with ease, so long as you write your letters properly.
Prepare the Relevant Documents
Your first step should be to get all your paperwork in order. Documents you will need include your loan documents, your pay stubs, and any other financial information that clearly demonstrates the difficulties you are in at present. If you do not have a job, you should provide evidence of any Social Security benefits you receive. Should you have been forced to reduce your contracted hours, you should have evidence of this. Do also make sure that you have evidence of all the payments that you did make, for instance, through your bank statements. This will set you in better standing with the creditor.
Write a Formal Letter
In terms of writing the letter itself, you must remember that it is a formal document. Hence, it should be properly addressed to the right person in the right department. You should include your account number in a visible way in the subject line. Additionally, your text should be clear and concise, highlighting precisely what your situation is and what you are proposing. Try to avoid becoming emotional in this, as the creditor is only interested in facts. Do also ask someone to proofread your letter, or reread it yourself the next day to ensure that it is free from grammatical and spelling mistakes.
Indicate Your Settlement Offer
Last but not least, the letter should include your settlement offer. If you want to settle your debt, you have to propose a figure that you feel is appropriate. In most cases, creditors prefer to make some sort of loan modification or adjustment, rather than agreeing to a settlement. However, there is nothing to stop you from trying, and the creditor is always welcome to make a counter offer. Do remember that you should be able to comply with the settlement that you offer should your creditor accept it. If you make promises that you can’t keep, you may find yourself in far greater financial difficulty later on. Be honest, be clear, and show that you are willing to come to a mutual understanding.
For more sample hardship letters and tips, click here.
Hardship Letter Debt Settlement Example
{Your Name}
{Your Address}
{Your Phone #}
{Date}
To Whom It May Concern:
I am writing this letter to request that a payment plan be worked out concerning my debt to {Company}. Due to financial hardship, I cannot meet the current conditions that are required, but I hope that we can come to an agreement.
My current income is {amount} per month, while my debt is {amount}. The income-to-debt ratio is {amount}, which is impossible for me to pay off at this time. If you can forgive {amount}, I can make a monthly payment of {amount} over the next {period of time}.
I am willing to make a sincere effort to settle this account. I ask only that the litigations against me are dropped and that the account is stated as paid in full. Thank you for your consideration.
Sincerely,
{Sender Name}