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How to Settle Debt with a Reduced Lump Sum Payment

Sarah Edwards | December 02, 2022

Sarah Edwards
Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

When you settle your debt with a lump sum payment ^^

Summary: Most creditors and debt collectors are willing to settle for a percentage of the original debt amount, especially if it’s the best you can do. They’d rather settle than be out of the money entirely. You can work with a debt settlement company to reach a debt settlement agreement, or you can negotiate one on your own with the help of SoloSettle.

Summary: Most creditors and debt collectors are willing to settle for a percentage of the original debt amount, especially if it’s the best you can do. They’d rather settle than be out of the money entirely. You can work with a debt settlement company to reach a debt settlement agreement, or you can negotiate one on your own with the help of SoloSettle.

Dealing with debt sucks.

You may find yourself facing a debt collector who doesn’t want to let you off the hook, calling incessantly and trying to get you to pay up. Each communication makes your heart drop, but you’re probably unsure of how to get it to stop.

If this sounds like you, you’re likely under a lot of stress. Credit problems can cause lots of anxiety and even put you into depression. You'll have to take action to stop the calls and eliminate the problem. You can either pay off the bill, set up a payment arrangement, or attempt to negotiate a settlement with the creditor.

When should I pay off a bill?

If you have the means to pay off a bill in collections, it’s best to do so. You’ll free yourself from future unwelcome calls from your creditor and can move on without fear of a debt lawsuit. You may also see some improvement in your credit score.

Paying off a bill is advisable for people who have some money in savings or enough disposable income to repay their debts. The creditor will report the account as paid in full to the credit reporting agencies, and you’ll no longer have to worry about it.

However, repaying a debt isn’t always possible, especially if your income is limited or you don’t have lots of money in savings.

Make a payment arrangement to pay off your debt

Setting up a payment arrangement can help you get back on track financially. You’ll come to an agreement with your creditor or a debt collector to make monthly payments on the debt. While you won’t be free from the debt, your lender won’t be able to pursue a debt lawsuit against you as long as you abide by the payment terms.

While you are making monthly payments, you can work on saving money toward a complete payoff of the debt or a settlement. You can also increase your monthly payment amount when you have extra income available.

You should try to pay off debt under a payment arrangement quickly. The quicker you do so, the faster your creditor will report the debt to the credit bureaus as fully satisfied.

How can I settle a debt?

If you have some savings available, you can attempt to negotiate a debt settlement with your creditor or debt collector. A debt settlement allows you to pay less than the total balance you owe and releases you from further obligations concerning the account.

Creditors and debt collectors are more likely to accept a settlement if they don’t believe you can repay the debt in full. Typically, if your account has gone to collections and you’ve stopped making regular payments, they’ll consider a settlement.

There are many debt settlement companies that can assist you in reaching out to your creditor or debt collector to settle the debt. These companies help by negotiating a settlement offer or changing the terms of your debt with the creditor or collector. In fact, the average consumer who works with a debt settlement company reaches a debt settlement of 50% the debt amount.

That being said, some debt settlement companies aren’t all they claim to be. In fact, several states have had to pass debt settlement laws to prevent these companies from taking advantage of consumers who are already dealing with debt. Plus, debt settlement companies charge fees of up to 25% of the debt in exchange for their services.

If you want to settle your debt, consider making a settlement offer on your own. It might feel intimidating to negotiate with creditors and debt collectors. SoloSettle can take the pressure off and get you headed in the right direction.

To learn more about how to reach a debt settlement, check out this video:

Start the debt settlement negotiation process on your own

To start the settlement process, decide how much you can afford to pay. An offer of at least 60% of the debt’s value will likely attract your creditor’s attention. Here’s an example of a debt settlement offer message:

"I, [your full name], am offering you a lump-sum payment of $___ to settle my account with account number ___. You can accept or counteroffer. If you accept, respond to this email with only "Accept." If you want to counter, respond with your counteroffer amount." Please do not contact me in any other way than by responding to this message. This offer expires in 6 days on MM/DD/YY. I will pay the agreed amount within 90 days of the settlement date."

After you send your initial offer, sit back and wait. Your creditor will likely need time to consider the offer.

Your creditor may respond with a counteroffer of their own. Consider it carefully, and decide what you can afford to pay. If their counteroffer is more than you have available, let them know and explain your circumstances. Sometimes lenders will be more lenient if they know you’re facing a difficult situation, like a job loss.

Let's consider an example

Example: Brad is being sued by a debt collector for an old credit card debt. After filing an Answer to the lawsuit, Brad uses SoloSettle to send a debt settlement offer to the collectors. He offers to pay a lump sum of 50% of the debt. The collectors respond with a counteroffer of 90%. After a few rounds of negotiations, they reach a debt settlement of 70% of the debt. Brad saves himself some money and feels much better about his financial future.


SoloSettle’s software takes care of the negotiation process for you.

Get the debt settlement agreement in writing

Once you reach an agreement, make sure to get it in writing before arranging the transfer of your payment. Sometimes, debt collectors will use nefarious tactics to get more money from you, even if you’ve made an honest effort to resolve the situation. A written contract protects you if they try to pursue you for the remaining debt balance.

Below is an example of a debt settlement agreement document:

Debt Settlement Agreement example

Try to adopt better financial habits when you’ve absolved yourself from the debt. If you’re struggling with your finances, credit counseling may help. A credit counselor can explain the basics of lending and setting up a budget that you can learn from.

What is Solo?

Solo makes it easy to resolve debt with debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

SoloSettle can help you contact your debt collector or creditor and negotiate the debt to settle for less, all online. It simplifies and streamlines the process to settling your debt.

No matter where you find yourself in the debt collection process, Solo is here to help you resolve your debt.

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