Debt Settlement Agreement Template

A debt settlement agreement is a document from a debt collector offering for a client to settle a debt for less than the full amount owed. You may need to use this type of agreement if someone defaults on a loan or credit card because they cannot afford to make the payments. Using a PandaDoc template ensures that the settlement is easy for your clients to understand while protecting you legally.

A debt settlement letter isn’t necessary, but it’s a great personal touch when you’re seeking to settle debt with a client. This shows the Debtor that while you are attempting to collect a debt that is owed, you’re also working in the best interest of the client. You’re offering them a settlement offer to pay less than the full amount they legally owe.

Congratulations, you are on your way to settling your debt with [Creditor.Company] . Our team is here to support you and as you work toward paying down your account with us. Please read the terms and conditions of the agreement below and sign electronically.

After we receive your signed documents, someone from our team will also sign, and the finalized printable PDF document is sent to the email address we have on file for you. If you need to contact us regarding your payment plan or to update any of your contact information, please give us a call at [Creditor.Phone] or email us at [Creditor.Email] . ​

This Debt Settlement Agreement (the “Agreement”) states the terms and conditions that govern the contractual agreement between [Debtor.Company] having its principal place of business at [Debtor.StreetAddress] [Debtor.City] [Debtor.State] [Debtor.PostalCode] (the “Debtor”), and [Creditor.Company] having its principal place of business at [Creditor.StreetAddress] [Creditor.City] [Creditor.State] [Creditor.PostalCode] (the “Creditor”) who agrees to be bound by this Agreement as of the effective date.

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WHEREAS , the Debtor is indebted to the Creditor in the amount of (Number) dollars ($Numerical.Amount) (the “Debt”); and

WHEREAS , the Debtor wishes to settle the Debt in full according to the terms of this Debt Settlement Agreement.

NOW, THEREFORE, In consideration of the mutual covenants and promises made by the parties hereto, the Debtor and the Creditor (individually, each a “Party” and collectively, the “Parties”) covenant and agree as follows:

Acknowledgment of debt

The Debtor agrees and acknowledges that it is indebted to the Creditor in the full

amount of the Debt.

Settlement amount

The Creditor agrees to accept from the Debtor, a total final payment amount of (Number) Dollars ($Numerical.Amount) as full repayment of the out standing Debt to the Creditor at the date hereof, subject to the terms and conditions of this Agreement. Payments shall be made according to the payment schedule outlined in the section below titled “Terms of Payment.”

Timeliness

The Parties agree and acknowledge that time is of the essence with regard to the Debt Settlement Payments. This applies to signing the Agreement and to making the payments according to the Agreement. If the Debtor does not sign the Agreement within ten (10) business days of receiving it, the Creditor may rescind the offer.

If the Debtor fails to make a payment as outlined in the terms of this agreement without communicating with the Creditor in advance, the Creditor may void the Agreement if they choose.

Voiding the contract means that the settlement amount is no longer valid, and the Debtor owes the full debt to the Creditor. It is at the sole discretion of the Creditor whether or not they void the Agreement if there is a breach of contract.

No modification unless in writing. No amendments are made to this Agreement unless completed in writing and agreed upon by both Parties. If both Parties cannot come to an agreement on amending the terms, then the Agreement should be carried out as it was originally written and signed.

Stating that “time is of the essence” ensures that the deadlines are an essential term of the contract and that missing any deadlines is deemed a breach of the Agreement.

Full integration

This Debt Settlement Agreement supersedes any prior agreements, understandings, or negotiations, whether written or oral. In other words, this agreement is now the ontrolling agreement with regard to the Debt.

In the event that the terms of this agreement are different from any other documents signed previously, the terms of this agreement are the ones that will be used.

If you have concerns about a previous discussion with the Debtor, make sure you address them in the Agreement. Ensure that it is clear whether or not those discussion items are part of the terms. This is a great way to personalize the document and show your client that you’re listening to their concerns. For example, if the Debtor requests that their debt is reported as “paid in full” to the credit bureaus, you should address this issue in the terms. This helps you avoid any misunderstandings regarding the debt appearing on the Debtor’s credit report in the future.

Force majeure

The Parties shall make any further assurances as may be necessary to implement

and carry out the intent of this Agreement. In other words, if needed, the Debtor and the Creditor will take additional actions in order to ensure that the Debt will be settled so long as the terms of this agreement are followed.‌

This section of the document refers to forces that are beyond either Party’s control. In the case that something happens affecting the terms of the Agreement, both the Debtor and the Creditor agree to work together and complete the terms of the contract. For example, if the Debtor may experience a financial loss that impacts their ability to make payments as scheduled. If the Debtor maintains contact with the Creditor about their circumstances, both parties should work together to reach the end goal of the contract, which is a debt that is paid in full as outlined by this Agreement.

Conditions

If there are any conditions that affect the Agreement, they should be outlined as part of the terms. Examples of conditions that may vary include enrollment fees, monthly account maintenance fees, or late payment fees.

If the debt settlement offer is contingent on the Debtor providing proof of financial need, pay statements, or other documentation, outline those expectations here. For example, you may allow a certain number of business days for the Debtor to provide those documents after both Parties sign the agreement. Alternatively, you may require that they provide documentation before signing to confirm their eligibility. If there are multiple contingencies, you can drag-and-drop a table to organize each condition and the corresponding expectation.

Governance

This Debt Settlement Agreement and the interpretation of the terms herein shall be interpreted in accordance with the governing laws of the State of [Debtor.State] . The Parties irrevocably submit to the exclusive jurisdiction of the federal and state courts located in [Debtor.Country] County, [Debtor.State] .​

You may have Debtors across many states. For ease of managing your portfolio of debt settlement contracts, list the same state on all of your agreements.

This ensures that you have an opportunity to study and anticipate the interpretation of laws and write the Agreement so that it is in line with your state’s expectations for financial matters.

Communication

Both Parties are expected to maintain communication, especially in the case of any change s that affect the Agreement. This includes changes like the contact person at the Creditor Company or the phone, email, or physical address of the Debtor.

Don’t assume that the Debtor knows they should

update their contact information with you. If you send correspondence regarding this Agreement to the wrong address, there may be a miscommunication about expectations between the Creditor and the Debtor.

Warranties

The Creditor agrees to accept the settlement amount as payment in full for the account(s) in question. The Creditor will not sell the debt to a third-party collection agency as long as the Agreement is active and once it is considered complete.

This section of the document protects both parties. If you need to add additional clauses to protect your business from future arbitration, use the drag-and-drop tool to customize this section.

Release terms

The Creditor agrees that once the Agreement is fulfilled, they will no longer pursue the original amount debt in full as agreed in the initial credit or loan agreement. While the Creditor may maintain records of the past account statuses for future reference, the Debtor is considered to be in good standing with the Creditor company.

The Debtor agrees that they will not take any legal action against the Creditor following the completion of the Agreement. The one exception to this rule is if the Creditor breaches the contract in some way.

For example, the Creditor may sell off the balance of debt owed outside of the settlement to a third party, which is in violation of the terms of this Agreement.

Severability

The terms of this agreement are accepted as a whole. If, for some reason, either party cannot carry out one part of the Agreement, the rest of the Agreement should be carried out as expected.

Similarly, if either party pursues legal action to void one part of the Agreement, and a court of law invalidates one section, it doesn’t void the entire Agreement.