are a few practical steps in an effort to relieve some of your financial stress. It is difficult to negotiate with a creditor
who has been ignored. Therefore, it is best for you to run toward creditors, not away from them. Most creditors respond best
to specific written requests that are backed by a detailed plan.
will need to write the creditors a letter
(do not telephone them) (see suggested format below) that states the source of your financial problems and explain the sequence
of events that has caused the accumulation of debt and put you in the position of future default on your scheduled payments. You will be asking the creditors
to: extend the life of the loans, eliminate late & overage fees and reduce the interest rates. This
letter preferably should be sent before you begin to receive reminder letters or phone calls from the creditor.
the letter should be a current detailed financial
statement that shows the name of all creditors, the amount owed (debt
list) to each creditor, and how much each creditor has requested for a monthly payment. You will also be sending a copy
of your most recent pay stub, and checking & savings statement to validate your request.
addition, you will need to send creditors a copy of your adjusted budget (we will complete this during our coaching
session) that reflects a detailed repayment plan and shows each creditor exactly how much that you are able to pay each one
of them each month. The letter should ask for their acceptance of the proposal.
offer a payment plan that will get the debt paid off in a reasonable amount of time, most creditors will not turn down payment.
But, if they do refuse and send your account to a lawyer, repeat the process with the attorney.
correspondence certified mail with return receipt and keep copies. You could send the first payment with the letter. You will
not want to send your personal check to a debt collector, so pay by money order instead. Just be sure to keep records of your
payment and your payment agreement. Often you will get a favorable response. If not, and they take you to court, you will
have a copy of the offer and proof it was received to show to the court that you made a reasonable attempt to pay the debt
Once you have committed yourself in the letter, it
is extremely important to stay committed and follow through. Do not renege.
Examples of Letters to creditors:
1.Letter that can be sent PRIOR to arriving at a Plan to Pay:
I am currently seeking the advice of a Financial Counselor, instead of filing bankruptcy, to determine the amount of
money that I can pay to each of my creditors per month. My income has decreased since (Month day, Year) due to (list
sequence of events that caused the decrease in income) and my expenses have increased due to (list reasons) which
has placed me in the position of future default on all of my scheduled payments. Currently
I do not have any money to apply toward my debts after making payment for my necessary expenses.
It is not convenient for me to receive phone calls at home or work regarding this debt and you
should only contact me in writing.
When we determine the amount that I am able to pay monthly I will contact you to make an installment agreement, hopefully
within 90 days.
Thank you for
your help in any way.
2. Letter suggesting Plan to Pay:
I have met with my Financial Counselor (instead of filing bankruptcy) and have prepared the enclosed projected budget.
I will be able to pay you $____ per month to retire my debt. My income has decreased
since (Month day, Year) due to (sequence of events that deduced your income) and my expenses have increased
due to (list reasons) which has put me in the position of future default on all of my
I am asking for you to: accept my proposed payment, eliminate late & overage fees and reduce my interest rate.
Attached you will find my first payment of $(____), personal financial statement, list of creditors, recent income
validation, bank statements and new projected budget.
Thank you for
your help in any way.
Clean up your credit report yourself http://www.crown.org/library/ViewArticle.aspx?ArticleId=351
Dealing with creditors http://www.crown.org/library/ViewArticle.aspx?ArticleId=360
How I Conquered the Debt Mountain http://www.crown.org/LIBRARY/ViewArticle.aspx?ArticleId=618
How to deal with collection agencies http://www.crown.org/LIBRARY/ViewArticle.aspx?ArticleId=766