Writing an Insolvency Letter to Creditors [with Sample]

Unfortunately, many people die while they’re still in debt. However, death doesn’t automatically eradicate all financial obligations just because someone dies. 

Creditors often approach those individuals who are associated with the estate of the deceased in order to collect payment.

specific relationship

Depending on their specific relationship with the dearly departed and whether the debts in question are joint debts, those individuals may not be liable to pay off the balances. 

If a creditor attempts to collect money from an estate that’s simply unable to cover the entire debt, it may be necessary to write an insolvency letter to the creditor to let them be aware of the situation.

What Is Insolvency?

From a practical standpoint, insolvency is the circumstances where a person can’t raise enough money in order to meet its financial obligations, or honor the debts for payment as they become due.

Technically referred to as insolvency, it could happen if the value of a person’s total liabilities surpasses its total assets. 

Insolvency alone doesn’t give enough leverage for lenders to legally petition with regards to involuntary bankruptcy concerning the borrower, or try to force a liquidation of their assets. 

Determining insolvency is key in order to deduct debt cancellation from the overall gross income. 

Keep in mind that if a debt is cancelled and it doesn’t have any positive impact on insolvency, then the debt that’s canceled will qualify as an actual deduction concerning gross income..

Sometimes, this is considered the lender’s legitimate way of ‘passing the buck’ over to you in order to defend themselves. 

Sample 1 – Insolvency Letter To Creditors

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


Name of Creditor Company Supervisor
Name of Company
Address of Company
City, State, Zip Code

Dear Name of Creditor Company Supervisor,

I am writing this letter to inform you that I am temporarily out of work, which has caused serious financial difficulty for my family. 

I have workers’ compensation as well as unemployment, but these are just enough to pay my mortgage and feed my family.

Because of my hardship, I am asking each creditor to kindly accept a reduced payment of $100 for the next six months. I expect to be back to work and receiving my full salary by that time. 

If I am able to work sooner, I will inform you and return to making the usual payments of $250 per month.

I prefer to deal with you directly and not a collection agency. I fully intend to pay my debts, but I need a bit more time. I also request that you withhold any interest on my debt for the next six months.

Please send a response to this letter in writing at the address above. I can also be reached at 555-123-4567 and at Name@email.com. Thank you for taking the time to consider my request, and I hope to have a favorable reply.

Signature of Consumer
Printed Name of Consumer

Sample 2 – Insolvency Letter To Creditors

Jane Smith
289 Forest Drive
Manilus, AR 98383

ABC Collection Agency
9877 North Avenue
Nelson, TX 78327

August 3, 2020

RE: Acct # 5656-9878-9668

To Whom It May Concern, 

I am writing this letter in response to a certain notice I received from your organization on July 18, 2020.  

This is not an actual refusal to pay. However, a notice to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) disputing your claim and requesting validation has been sent. 

This is a formal request for validation regarding the previously mentioned title and section, rather than proof of my actual mailing address or request for verification. 

I am respectfully requesting that your organization give me clear evidence that I am personally and legally responsible to pay you. 

I am requesting the following:

  • What the exact amount of money you claim I owe is actually for
  • Explain in detail how you calculated the amount what you claim I owe
  • Give me copies of any official papers that prove I agreed to pay you what you claim I owe
  • Reveal the original creditor
  • Provide a copy or verification of any judgment if it applies
  • Prove to me that the Statute of Limitations hasn’t expired regarding the account
  • Prove to me that you’re a Registered Agent and show me your license numbers
  • Prove to me that you’re legally licensed to collect debt in my state

Also, if your organization has reported any invalidated information regarding this matter to the three credit bureaus, including TransUnion, Experian, or Equifax, it could be considered fraud according to Federal and/or State laws.

Therefore, if I discover any negative marks on my credit report from your organization, I won’t hesitate to pursue legal action against you since you will be in violation of the following: 

  • Defamation of Character
  • Fair Debt Collection Practices Act 
  • Fair Credit Reporting Act

The sooner your organization can provide the requested documentation, the sooner this matter can be resolved. 

I will need a minimum of 30 days in order to fully investigate this matter. During this period, any collection activity has to cease and desist immediately. 

Also, if you take any action while I am validating your claims that could possibly be considered harmful to my credit report, I won’t hesitate to contact my attorney. 

This may include any information sent to a credit reporting repository that’s considered invalidated or inaccurate. 

If your organization fails to respond to my request within 30 days of the date shown, all references concerning this account have to be deleted and removed 100 percent from my credit files. I am requesting that a copy be sent to me immediately after such deletion. 

Also, I am formally requesting in writing that your organization cannot contact me at my place of residence or my job. 

If you do attempt to contact me, whether it’s through a third party correspondence or computer generated calls, it’s considered harassment and I will immediately file a suit against you. 

Any communications in the future with me personally must be in writing and submitted to the address listed above. 

This is my personal attempt to point out to you that your records are incorrect. Any information I receive will be used to achieve that specific purpose. 

Best Regards, 

(sign your name here)
Jane Smith

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