WRITING A DEBT FORGIVENESS LETTER (WITH SAMPLE)

Asking for forgiveness of a debt is one way to handle financial difficulties. A debt forgiveness letter is generally associated with home mortgages that are higher than the worth of the property. 

The homeowner needs to reduce his or her mortgage or get approval from the lender to sell the house short. Debt forgiveness letters can also be used to reduce credit card debt as well as other types of debt such as a car loan.

The most common financial hardships are caused by:

• Loss of income
• Personal or family medical bills
• Loss of spouse’s income
• Decreased income because of reduced working hours
• Failed business
• Death or divorce in the family
• Work Relocation
• Military duty
• Jail time
• Severe property damage from natural disaster 

Even though these circumstances are out of the consumer’s control, it doesn’t mean that forgiveness of debt is their right. Consumers are responsible for 100 percent of their debt. 

The creditor has the right to decide if they think the consumer deserves help. The purpose of the letter is to convince the creditor that the consumer deserves debt relief consideration.

Polite and Respectful Tone

The letter should have a polite and respectful tone without any sign of anger or expectation. The letter should also give only the necessary information and not add unnecessary information such as the consumer has entered rehab for alcohol addiction or lost a lot of money gambling. 

The main three things the consumer needs to include in the letter are:
• Why they can’t continue to repay the debt and steps they have taken to repay the debt, if any
• The consumer’s current financial situation including any assets they own
• How much they can offer to settle the debt

There are legitimate debt management companies that ask their client’s creditors to settle debts, but consumers can do it themselves without the help of a professional. The first step is to contact the creditor and ask for forgiveness of the debt. If the consumer has fallen drastically behind in payments on the debt, a letter asking for debt forgiveness can help.

The consumer needs to gather all the paperwork that pertains to the debt. This may include unemployment checks, pay stubs for reduced working hours, bank statements, the original loan contract and all the documents related to the financial hardship.

Proof Of Hardship

All medical bills, proof of loss of job or any other hardship that has contributed to the loss of income should be included. The reason all of these documents help is because the creditor gets a full picture of the consumer’s financial difficulties and payment record. If the payment record was good before the hardship, the creditor will be more likely to help.

The letter should clearly state if the consumer wants debt forgiveness or to make a settlement. Since hundreds of people may be making the same type of request, it’s important for the consumer to state their desire clearly and concisely and support it with documentation. 

Here are sample debt forgiveness letters. It should be sent by certified mail, so the consumer has proof that it was received. The consumer may send several such letters to different creditors, and each letter needs to be unique. There is no one-size-fits-all debt forgiveness letter. 

Sample 1 – Debt Forgiveness Letter

Name of Consumer
Address of Consumer
City, State, Zip Code

DATE

Name of Lending Company
Address of Lending Company
City, State, Zip Code

RE: Debt forgiveness for credit card account number NUMBER

Dear Sir/Madam,

I have held Name of Credit Card since 1990, and always made regular payments. Due to physical hardship, I have lost my job and am living on unemployment checks for the past three months. I was a bus driver for Name of School District but broke my leg in a skiing accident, through no fault of my own, and will be laid up for the next six months. 

I have included the medical documents and unemployment check records. My salary has been reduced from $40,000 per year to $25,000 per year, and I need to make a monthly $800 payment on my mortgage, or I will lose my home. Because of the drastic change in my financial status, I am asking for help with the balance of $2,000 and late fees I owe on this credit card. 

I would like to know if you have a program to assist hardship cases. I need to pay off the balance and close this account. I would be happy to work with you to achieve a resolution that is satisfactory to both of us. I have included all the documentation that relates to my medical bills, current income and previous payment record. 

I can be reached at Phone Number or at Email Address if you have any questions. I hope the situation can be resolved soon. 

Thank you for your attention to this matter.

Sincerely,

Signature of Consumer
Printed Name of Consumer
List of Enclosures

Sample 2 – Debt Forgiveness Letter

Name of Consumer
Address of Consumer
City, State, Zip Code

DATE

Name of Lending Company
Address of Lending Company
City, State, Zip Code
Subject:  Credit Card Account 5455-9087-3457-0987-2345

To Whom It May Concern:

I have had an XYZ Credit Card since 1985. Recently, I was diagnosed with a health problem that has impaired my ability to work full time. My salary of $50,000 has been reduced to around $25,000, as I can only work part time hours.  

I anticipate this reduction in pay and hours will be for at least a year or more. Giving my current financial status, I am asking for help in reducing the late fees and the balance on this credit card. 

I would like to reach a settlement on this card so that I can pay off the balance and close the account. Currently, there is about $2,000 owed on this debt. What kind of programs do you have to assist people who are in my position? I have also attached documentation, including my pay stubs, so you may see that I am in a financial pinch. 

If you have any questions, please feel free to call me at 740-980-7899. I look forward to working out this situation with XYZ Credit Card in a manner that is satisfactory to both parties. 

Sincerely,

Signature of Consumer
Printed Name of Consumer
List of Enclosures