Updated June 23, 2023
A debt settlement agreement is a contract signed between a creditor and debtor to re-negotiate or compromise on a debt. This is usually in the case when an individual wants to make a final payment for a debt that is owed. The debtor offers a payment that is less than the outstanding due (usually between 50% to 70%) if the payment can be made immediately.
Sample
DEBT SETTLEMENT AGREEMENT
Effective Date: [DATE]
This Agreement is for the negotiation and compromise of a debt under the following terms and conditions:
The Parties. [NAME OF CREDITOR] with a mailing address of [ADDRESS], City [CITY], State of [STATE] shall be known as the “Creditor”. [NAME OF DEBTOR] with a mailing address of [ADDRESS], City of [CITY], State of [STATE] shall be known as the “Debtor”. When mentioned jointly shall be known as the “Parties”.
Debt Settlement. It is understood amongst the Parties that the Debtor has an outstanding debt with the Creditor. Through the mutual interest of the Parties, they agree that this outstanding debt shall be marked as paid if Debtor shall make payment of $[AMOUNT] by [DATE].
Post- Payment. After the payment has been made by the Debtor the Creditor shall make any and all efforts to remove the outstanding debt from the Credit Reporting Agencies. Furthermore, the Creditor declares that they will not make additional information that could harm the Debtor’s credit report.
By signing below, the Parties agree to abide by the terms and conditions of this Agreement.
Debtor’s Signature ______________ Date ______________
Creditor’s Signature ______________ Date ______________
How to Write
1 – Decide Upon Which Format You Would Like To Obtain Then Download It
The Agreement on this page will supply the paperwork required to set a Settlement Agreement in action. Download it using one of the three buttons presented on this page to choose the format you prefer (PDF, Microsoft Word (.docx), or Open Document Text (.odt))
2 – Produce The Requested Information
Several pieces of information will need be needed to balance the wording in this Agreement. To begin we will solidify the parties that intend to enter this contract. First, we will identify the Creditor. That is, the party that holds the debt. Record the Legal Name of the Creditor on the first blank space in the first paragraph. Then, using the second blank line, document the Creditor’s Street Address. Finally, the third and fourth blank spaces will need the City and State associated with the Creditor’s Street Address supplied on them. 
Next, we will identify the Debtor. This is the party obligated to satisfy the debt owed to the Creditor. We will need to document the same information reported on the Creditor in the remainder of this paragraph. Locate the fifth blank space in this paragraph then, document the Full Name of the Debtor on it. Continue the Debtor report with his or her Street Address, City, and State of Residence on the sixth, seventh, and eight blank spaces.
Several additional areas will also require information, beginning with “I. Effective Date.” This is the Date when the terms of this Agreement will become active or Effective. Record the Month Name, Two-Digit Day, and Two-Digit Year of the first Calendar Day this Agreement becomes active.
Next, in “II. Present Debt,” we will need to document the Full Current Debt the Debtor is obligated to pay the Creditor. Use the blank line placed after the dollar sign in this statement to record this amount of money.
The third item, “III. Settlement Debt,” calls for the adjusted Debt Amount set for the purposes of this document supplied to the blank line. This is the amount of money the Debtor has agreed to Pay in the manner defined here in exchange for the Creditor’s debt forgiveness. Enter this amount on the blank line following the dollar sign in this section.
The section labeled “IV. Payment has been worded to solidify how the Settlement Amount must be paid to the Debtor. A series of checkboxes have been provided so this may be done efficiently. Mark the “Check,” “Bank Wire,” “Certified Check,” or “Cash” checkbox to indicate how the Debtor must pay the creditor. If none of these define how this the Settlement Amount must be paid, then mark the “Other” checkbox and report the Payment Instructions the Creditor expects the Debtor to follow when submitting the required payment.
The next sentence in this item will seek to solidify the Date when the Creditor must receive the Settlement Amount from the Debtor. Locate the blank line after the words “…Settlement Debt Amount By” then enter the Month Name and Two-Digit Calendar Day when the Creditor must receive this payment. On the blank line after that, record the Two-Digit Calendar Year for this Date.
The next area requiring attention will be “XII. Governing Law.” Use the blank line in this item to report the State where the terms of this contract will be governed and enforced.
3 – Both Parties Must Sign This Document To Execute It
The final requirement of this contract will be to bind both parties to its terms. This can only be done through the Dated Signatures of both the parties.
The Debtor must sign this Agreement to formally enter it. He or she will need to locate the words “Debtor’s Signature” then sign the blank line after them. Adjacent to this he or she should enter the current Date. Finally, the Debtor must print his or her Name on the blank line labeled “Debtor’s Name.”
The Creditor must sign his or her Name on the “Creditor’s Signature” line, then supply the Date he or she signed this document on the empty line next to it. Below this, the Creditor must sign his or her Name. If the Creditor is a Business Entity, then an individual who is authorized by that Business Entity to sign this document on its behalf must sign his or her Name. When Printing his or her Name, the Signature Party should follow it with the Legal Name of the Business Entity as reported in the first paragraph (i.e. John Doe, 1X Corp.).