Debt Settlement Agreement Template

A debt settlement agreement template defines the legal terms and how this agreement works. It is used to settle financial disputes between a money lender and a debtor. Whereas; a debtor is the person who agrees to pay the debt amount on a set period; whereas; the creditor is the person or party who has given the loan amount and is now willing to get it back. It contains a set of generally accepted terms and conditions, which both of the parties have to accept. The main reason for preparing a debt settlement agreement is when a debtor fails to make payments within a given time-frame and looks for other ways of negotiating new terms with a creditor. For this purpose, a debtor communicates with the creditor, and upon their approval, he/she either return the lesser amount of loan or starts paying amount into equal installments.

Benefits of a Debt Settlement Agreement

A debt settlement agreement serves multiple benefits, not only to creditors as they can receive their bad debts but also very crucial for debtor, as a legal evidence of settling loan obligation. It also helps to avoid any misunderstandings between both parties. To make this agreement work accurately, you will need to write down all the elements of the settlement agreement clearly and visibly. If a debtor is not capable of paying back the exact amount of debt. Most creditors ask the debtor to either pay back a lesser amount or reimburse the actually amount in installments. It is an ethical way to solve the issue without any harm done to either of the parties.<./p>

Content of a Debt Settlement Agreement

Normally, agreements are prepared in the same format with a few exceptions made relating to the topic. The most crucial thing which everyone needs to keep in mind while preparing this agreement, is to be very clear with your words. It would certainly be wise to avoid any misconceptions that can arise due to difficult wording used in the document. Secondly, the proper format of the agreement should be strictly followed. Perhaps, changings can be made in the terms and conditions sections to make is acceptable for all the concerned parties. A rough idea of what the format of a debt settlement agreement should be is given below:

1. A debt settlement agreement always starts with the date on which the document will be made effective.

2. Introduction to both parties and their respective address.

3. The amount of debt that was originally taken from the creditor along with date and check number.

4. The amount of debt settled after negotiation between both the parties and when the debtor agrees to pay it.

5. How will the payment be processed (check, cash, debit, deposit, etc.)?

6. The last date of submission of the money.

7. The agreed duties of both the parties involved in this agreement. These include the rights that both parties have over each other and the rights that of the other party that should be protected. These mostly include the creditor’s rights/duties, and debtor’s rights/duties.

8. Lastly, the confidentiality right of the agreement. This means that the contents of the agreement can not be disclosed to any third party. Incase of violation of this law, the violating party will be subjected to a monetary fine and charges can be held against them by the law.

All parties involved in this agreement are required to sign the agreement in order to take benefits from this agreement. Once, it has been signed, all concerned parties are bound together until the debt amount is completely paid off. They can take copies of this agreement after getting this agreement into enforcement.

Template for Debt Settlement Agreement