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What to Ask for in a Settlement Agreement

Sarah Edwards | December 28, 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.

You've made a deal with your creditor. Now get it in writing.

Summary: The end goal of debt settlement is to be released from a financial obligation and have your account reported as settled or paid in full. As such, when settling a debt, there are certain things you should ask for in a settlement agreement, including: the stipulation that payment constitutes full settlement of the account, a requirement that the creditor reports the account settlement to the credit reporting bureaus, and the creditor’s release of all further claims related to that debt.

If you’re seeking to eliminate your debts through settlement, congratulations! With debt settlement, you can wipe out your old obligations and start your new life unencumbered by the neverending cycle of minimum payments and debt collectors.

Before starting the debt settlement process, you’ll need to understand how it works, including what to ask for in the agreement. You’ll also need to prepare yourself for inevitable negotiations. Depending on the number of creditors you have, you may need to speak with multiple companies before you become debt-free.

When starting the debt settlement process, first determine your non-negotiables. The end goal should be a release from the remaining balance of the debt and to have your account reported settled or paid in full to the credit reporting bureaus.

As such, your written agreement should indicate that your payment constitutes a settlement and request that the creditor forgives the remaining balance of the loan.

Below are some mandatory items to ask for in a settlement agreement:

  • The date of the settlement agreement
  • Your legal name and address
  • The name of the original creditor and account number
  • The collection agency's name (if applicable) and your account number
  • The total amount of the settlement
  • When the payment is due
  • Where you must send the payment (a physical address or online portal)
  • The stipulation that payment constitutes full settlement of the account
  • A requirement that the creditor reports the account settlement to the credit reporting bureaus
  • The creditor’s release of all further claims related to that debt

You may also include any terms specific to your deal. For instance, if you plan to extend your settlement payments over a few weeks or months, the agreement should indicate the due dates.

Here’s a debt settlement agreement example, with a preview attached below:

Debt Settlement Agreement example

How does debt settlement work?

Debt settlement involves paying off an old obligation for a fraction of its original value. In exchange for a one-time payment, your creditor agrees to release you from future collection efforts and reports your account as settled to credit reporting bureaus.

As long as you abide by the terms of your settlement agreement, the creditor can no longer pursue you for payment.

If you’re seeking to eliminate all of your debts, debt settlement can save you thousands of dollars in interest and penalties. It also allows you to pay less than you truly owe the creditor.

Debt settlement does have disadvantages. Your credit score will take a hit, and it may take some time to recover. You’ll may have difficulty getting new credit or buying a home for a few years, depending how other accounts in your name are being handled.

However, you can repair your credit score and emerge from the process in a better financial position, with more money to spend on the things that truly matter: like taking care of your family and saving for retirement.

Should I handle debt settlement independently or with a debt settlement agency?

Debt settlement agencies offer to settle your debts for a fraction of the cost, acting on your behalf to negotiate fair agreements with your creditors. You pay them a set monthly amount throughout the length of your program, and they save the money to put toward paying off your debts.

While working with a debt settlement agency may sound like a good idea, they’re expensive. Typically, you’ll pay about 25% of the total value of your debt to the settlement company for its services. The fees you pay to the agency are baked into your monthly payments, and there is no guarantee of savings from their negotiations.

Let’s look at an example.

Example: Mike has $10K in credit card debt. He signs up with a debt settlement agency that manages to settle all the debts for 65% of their original value. The debt settlement company adds 25% to the bill for their services. Mike ends up saving only 10% through the program, or $1K.


You can handle debt settlement yourself and save the money you’d pay to a settlement agency. It will take additional effort, but the payoff might be worth your trouble.

How to start the debt settlement process

First, list out all the debts you intend to settle. Include the total amount you owe, the name of the creditor currently owning your account, and your last transaction with it.

Next, create a savings plan. Ideally, you should save as much money as possible each month toward paying off your debt.

Proper debt settlement plans require you to stop making payments to your creditors. When you stop making payments, your creditors will be more willing to accept a settlement offer since they think you no longer have the money to keep up with your minimum payments.

Use the money you’d typically pay your creditors and put it in savings. If you can, take on a second job to save more toward your settlement plan. The faster you can settle your debts, the quicker you can recover financially.

Identify which creditors you want to pay off first. Some people start with small debts, which allow them some early wins. You’ll also be able to build up your negotiating skills before you get to the more significant obligations, which can be costly to settle.

Here’s what to include in your debt settlement offer

You’ll want to send a debt settlement offer that you can modify for each account. The offer should include specific information, like:

  • Your name and contact details
  • The name of the creditor or debt collector
  • Your account number
  • The amount you currently owe
  • What you can offer in a settlement
  • Instructions for the creditor to approve or deny your request
  • A request for the creditor to report your account as paid in full to the credit reporting agencies

The amount you offer as a settlement will vary depending on who owns the account and how old it is. If your account is still with the original creditor and you haven’t made payments for at least six months, it’s fair to offer 50% of its value in return for a settlement.

Negotiate a settlement with a debt collector suing you

If you’re the subject of a lawsuit from a debt collector, you’ll want to take action quickly. Follow these steps to settle your debt:

  1. File an Answer to the debt lawsuit. Use SoloSuit to draft and file your Answer in minutes. Be sure to send a copy to the opposing lawyer. If your efforts to settle the debt fall through, filing an Answer will protect you from losing the case automatically by default judgment.

  2. Make a settlement offer. Decide how much you can afford to pay the debt collector. You’ll want to offer a fair amount—60% of the value of the debt might be a good place to start, depending on your debt situation. For example, if you owe $10K, you may offer $6K to the collection agency. Keep in mind that It’s not unusual to go through several negotiations before reaching a settlement agreement.

  3. Get the settlement agreement in writing. Obtain the creditor’s consent to the settlement in writing. You’ll also want a statement confirming that your account is clear and that it will pursue no further collection efforts against you. Request that the creditor report your account as paid in full to all credit reporting agencies. Payment in full status notifies potential future creditors that you have no remaining obligations for your old account.

Settle your debt on your own with SoloSettle’s help.

To learn more about these three steps, check out this video:

Settle your debt with the help of SoloSettle

SoloSettle, powered by SoloSuit, is a tech-driven approach to debt settlement. Our software drafts, sends, and receives settlement offers on your behalf so you don’t have to deal with the stress of communicating with your creditors or debt collectors.

On top of handling the negotiation process, SoloSettle’s services include the management of your debt settlement agreement documentation and payments. That’s right; SoloSettle makes settlement payments to debt collectors for you so you can keep your financial information private and safe.

Most importantly, SoloSettle is not a scam. In fact, many people prefer SoloSettle over traditional debt settlement companies for the following reasons:

  • You can settle debts of any size with SoloSettle. Many debt settlement companies require you to have a debt over $15k.
  • SoloSettle actively attempts to settle your debt, whereas many debt settlement companies take a more passive role, waiting for settlement offers to come to them.
  • SoloSettle is offered by SoloSuit, a trusted brand and a legitimate company. Many traditional debt settlement companies are actual scams.
  • SoloSettle has legal defense built in with SoloSuit. While settling, you can use SoloSuit to block lawsuits if you need. Most debt settlement companies don’t provide legal defense; if you’re sued for a debt you are on your own.

Still not convinced? Check out this review from a real SoloSettle customer:

“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.

SoloSettle really saved me a ton of time and heartburn and kept me from having to be my own lawyer in court.”

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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