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Settlement Letter Help

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Over the last18 months I've been going through a nasty divorce (was left with nothing but my home and almost didn't get that), had to refinance my house from the ex then, lost my job due to COVID a couple months after the refi, and am dealing with expensive long term serious health issues without health insurance.  I was unemployed for almost a year.  Unemployment insurance in my state wasn't enough to cover my mortgage, living expenses, car payment, insurance, medications, etc.  What little savings I had was quickly eaten up.  My health issues won't allow me to go back into my field so I've had to find something else that I could do.  I finally found a job 3 months ago but had to take a 40% cut from my previous salary and the health insurance benefits cost almost an entire weeks pay.  I tried a second job for a couple months but that knocked my health down even more.  Needless to say my financial situation is bleak at best.  I've managed to keep up with my mortgage, car payment, insurance, and living expenses (just barely) but not the credit cards.  I've talked to the CC companies and asked for assistance but, aside from one, they've not been helpful at all.  Their "plans" to help me get back on track were basically the same as what the monthly payment was prior to my financial problems.  If I could afford that I wouldn't need their plan.  After their lack of help I cut off all communication with them as they cause too much stress which aggravates my medical condition.  Now those accounts have been turned over to CAs, which I am also blocking.  I want to do the right thing and pay what I owe but in my current situation the funds just aren't there.  So, I'm considering sending the CAs settlement offer letters.  With my current income I can only afford to pay about ten to fifteen cents on the dollar, but it's either that or I file BK7 and they get nothing and, truthfully, I don't want to file BK.  I found the sample letters here and have combined parts of two of them with some of my own wording.  I added the sentences about the counter offers as I know that's a tactic of theirs to try to get more out of me, and the offer I'll be making is the maximum I can afford to do.  The letter is below.  Please let me know what you think - is there anything I should say differently to help maximize my chances of success?  Should I threaten them with filing BK7?   Also, will you please share any experiences you may have with this type of thing?  Here's the letter:


My Name
Address line one
Address line two




CA Name

CA Address 1
CA Address 2


Re: Account Number


CA Name:


This letter is an offer to amicably settle the above account.  It is not to be construed as an acknowledgment of my liability for this debt in any form as I doubt its validity.  I am willing to pay your company the amount of $____ as FULL SETTLEMENT of this account provided you agree to the immediate deletion of this account from all credit reporting agencies (Equifax, Experian and TransUnion).  This offer is not to be construed as an acknowledgment of liability for this debt in any form.  This offer is my best and final offer, it is the only offer you will receive and the only offer I agree to.  Counter offers will not be considered or accepted.


If you agree to the terms and accept this agreement, certified funds for the settlement amount of _______ dollars ($_____) will be sent to CA NAME in exchange for full deletion of ALL references regarding this account from my credit files and full satisfaction of the debt.  As certified funds will be used for payment, there shall be no waiting period regarding the deletion of this account from the credit reporting agencies.  CA NAME agrees to delete ALL information regarding this account from the credit reporting agencies WITHIN TEN CALENDAR (10) DAYS following receipt of payment as specified above and will not discuss the terms of this settlement with anyone, excluding your client on this account.  If contacted by any third party, including credit-reporting agencies, CA NAME will not acknowledge that any settlement offer was made, accepted or executed and will, in fact, deny knowledge of any such account.


If you agree to the above terms, please prepare a letter on your company letterhead explicitly agreeing to the same terms as the above settlement offer and have it signed by an authorized representative of CA Name.  It will be implied that this letter shall constitute a legally binding contract, enforceable under the laws of my state.  Your response must be postmarked no later than 10 calendar days from your receipt of this settlement offer or this offer will be withdrawn.



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If I should threaten BK7, should I add a paragraph at the end that reads:  "I also wish to advise you that I will soon be starting the process of filing BK7.  Should you decline to accept this offer it will be a simple matter for me to include this account in that filing and I fully intend to do so."

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First and foremost you need to protect your health and that letter isn't going to do it.  That letter will escalate how fast these creditors sue you.  It reeks of cut and paste from the internet and those almost never work.  A carefully worded letter outlining your personal situation and the settlement offer is all that is needed.  Empty threats, demands for all terms are not needed.  A simple "after 2 years of health problems and a contested divorce I am regaining financial health as well as physical health.  I would like to settle this account and at this time am able to offer (lump sum amount) as full settlement.  In exchange for payment I would like the trade line to be deleted from all bureaus."  First you have to get the to agree to what you can pay. The rest of the details can be debated after they accept the amount because if they won't take what you can pay the rest is moot.


As for the pay for delete demand:  who are the creditors?  There are several that have a hard line stance against doing PFD and won't agree to it on that alone.


Next is what state are you in?  Some states give their residents added protections but you must invoke them following the state laws.  


When did you default?  If the SOL is still alive the chances that an original creditor takes ten to fifteen cents on the dollar are slim to none.  The only time I have seen or heard of an offer that low being accepted is when the SOL is expired for suits and the account has been sold multiple times.  Also understand that now that you are working if you are in a state that allows wage garnishment doing this now could just escalate how fast they file in court.  


There is no reason to threaten BK.  They will ignore it and it will not get you a better settlement or them to agree to terms they won't accept.  They hear that threat thousands of times a month and know it is usually an empty threat.


If you list who you owe and what state we can give you more targeted advice.


One last idea:  given that the housing market in many areas is on fire right now one way to avoid BK would be to sell the house if there is equity in it and pay off these debts with a higher settlement offer even if not the full amount.  You could put all your stuff in storage and rent something smaller until the market calms down then purchase another home or condo after some credit rebuilding.  That would help you avoid BK and potential lawsuits.


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Thank you, these are the kind of things I need to hear.  I'm new to all this and it's very intimidating.  I like what you've written and, if you don't mind, would like to use it as a basis for writing a good letter.  What percentage on the dollar do you think I should offer to settle for?  What do you think about my offering to settle for "X" amount and for the creditors with larger balances say that I need to pay it with a monthly payment of "X" and make that amount something that I can actually afford instead of their ridiculous non-helpful plans.  It would be a small payment amount but it would be the best I can do.


Should I send the letters to the OC or to the CA?


The original creditors are Cap1, Synchrony, Merrick Bank, Credit 1, and a couple others that are small, but they've all been turned over to CA's.  The total amount in default is <$10k.  The defaults are all 1.5 years old or less,  The SOL in SC is 3 years and is still active for all the accounts.  I just did a google search and SC doesn't allow creditors of consumer debt to sue and get a judgment to garnish wages so that's a good thing for me.


I've looked into the possibility of selling my house as the housing market here is good also, and found that selling isn't a viable option.  My mortgage payment is low and very affordable for me.  If I sell and use the equity to pay off the creditors the remainder wouldn't be enough to make a dent in buying another home and getting the payment as low as it currently is, and that's if I could find someone willing to finance it.  I looked at renting instead of buying and isn't an option either as rent in this area is prohibitively high, a one bedroom apartment in a slum neighborhood currently goes for around $1k a month, apartments in decent areas are higher.  Five years ago, before my son and daughter-in-law bought their house, the two bedroom apartment they were living in, that was in a decent area, was costing them $1.2k a month, I think those same apartments are around $1.5k a month now.  My mortgage payment is less than half of that amount.  Last week I talked to my mortgage company, which I'm not behind on, about a problem with my escrow account and the property taxes that were just paid.  During the conversation I mentioned everything that has gone on in my life the past two years and that the problem we were working on fixing was just one more thing I've had to handle.  The woman I was talking to was very empathetic, appreciated how I made sure my mortgage was always paid on time, and told me they'd be willing to consider lowering my interest rate to help make sure I can continue to afford my home.  If they do that it will drop my payment even lower.


What do you think of this letter.  I used your example and built on that.


OC or CA Name:


After 2 years of health problems, a contentious divorce, and being unemployed after losing my job due to COVID, all of which contributed to my to falling in arrears in my financial obligations; I am starting to regain my financial health as well as my physical health.  I would like to settle this account and at this time am able to offer $_______ as full settlement.  This amount is the most I can afford as my income now is less than half of what it was two years ago.  <<this is what I'd add for the creditors where the settlement amount would be more than what I could afford on one lump sum>>  Additionally, I must split this amount up in "X" monthly payments of $______ as my budget is unable to support a lump sum payment of the size of my offer.


<<Would it be helpful or hurtful to add a request for updating my credit report by adding something like this to the letter...>>


In exchange for this I request that you agree to update my credit record with all three credit reporting agencies to show my account "Paid In Full/Paid As Agreed" with NO mention what-so-ever of there being a settlement.


If my offer is acceptable, please send me a letter confirming our agreement.  Within ten (10) business days of my receiving your letter accepting my offer I'll send the payment of $____ to you in certified funds.  I ask that you please do NOT call me, I can't risk your call coming in while I'm at my job, nor can I give you an acceptable time to call as my work schedule is very fluid and varies day-to-day and week-to-week.


Awaiting to hear back from you,

My Name (Typed not signed)



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Keep in mind that a debt that has been sold is not one where the current third-party holder can enter into an agreement related to the OC reporting.  Only if the OC still holds paper is there a chance of getting relief that involves the OC reporting of the tradeline history.

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If your mortgage is affordable and current rents are not as affordable, you're in the very difficult position of wanting to keep your house while not paying credit card debt.


Threatening to file bankruptcy is not a good idea, and unless you've done extensive research and talked to a few lawyers, you don't know if you qualify for Chapter 7 while keeping your house.


In addition to posting the details of your debts, post the state you live in and the amount of equity in the house.


A hot housing market may not be your friend if you can't afford to pay your credit cards and have a lot of equity in the house you can't exempt.

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Centex -- Ok, so don't send the settlement letters to the OC,s but rather to the CAs and ask the CA to report paid as agreed?


DollarDog -- I want to pay the credit card debt, but with my financial downturn and high medical expenses I can't afford the payments at their previous level.  Since there are CAs involved now, I'm hoping they'll be willing to settle for a reduced amount and I'm trying to find out what a reasonable percentage I should offer would be.  Another alternative I just thought of is to simply calculate how much I can afford to send each CA every month and just do that.  But, I'm afraid that will keep the SOL going which I've read here is not a good thing to have happen.  At least I'm in SC and creditors here are prohibited from suing/getting judgments/garnishing wages for consumer dept such as credit cards.


Leaving my home is out of the question, so I guess that puts BK out of the question as well if it will cause me to lose my home.   I had to fight to keep the ex from taking it and leaving me on the street like he took pretty much everything else (long story, I was too trusting).  I've lost too much already over the past few years, one after the other, including my marriage, both of my parents, my health, my good paying job, my good medical insurance, my self esteem, my self respect, even my dog and my cat.  I'll be darned if I lose my home too.  I'm facing two major surgeries within the next year that I have to try to save up for to pay my portion of the bill and now I've found out that I need a root canal and crown on a tooth.  My income level would qualify me for a couple of the free dental programs available here but because I have insurance I'm automatically disqualified, never mind the fact that my part of the bill is in excess of $1,300 - which I don't have laying around since that's almost an entire month's pay.  It's a giant catch 22.


And I'm sorry if it seems like I'm ranting at you.  I promise I"m not.  I guess I'm just ranting in general.  I simply want to figure out a solution that, while not optimal, would at least be an acceptable level of win/win for all concerned.  If I can do that then I can put this source of stress behind me and move on to handling the next one.

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14 hours ago, sunnygal said:

Centex -- Ok, so don't send the settlement letters to the OC,s but rather to the CAs and ask the CA to report paid as agreed?



Letters would go to the OC IF and ONLY IF they still own the paper.  If they don't own the paper and instead sold it off, they are out of the settlement equation.  A third-party that has purchased the paper cannot enter into an Agreement that would modify any reporting other than their own. 


Until you know who owns the paper, you should do nothing.  You still have homework to do before sending anything to anyone...

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