How to Settle Debt with a Reduced Lump Sum Payment

Sarah Edwards | December 02, 2022

Edited by Hannah Locklear

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

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:

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 SoloSuit?

SoloSuit makes it easy to fight 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.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to answer a summons for debt collection in your state

Here's a list of guides for other states.

All 50 states.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Guides on how to beat every debt collector

Being sued by a different debt collector? Were making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Cypress Financial Recoveries
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Fulton Friedman & Gullace LLP
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mannbracken
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• Nationstar Foreclosure
• Northstar Capital Acquisition
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Pallida LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• Provest Law
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• Regents and Associates
• RSIEH
• Salander Enterprises LLC
• Second Round Sub LLC
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group
• Weinberg and Associates
• Wolpoff & Abramson

Win against credit card companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get answers to these FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendants Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouses Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

How Does Debt Assignment Work?

What Happens If a Defendant Does Not Pay a Judgment?

How Does Debt Assignment Work?

Can You Serve Someone with a Collections Lawsuit at Their Work?

What Is a Warrant in Debt?

How Many Times Can a Judgment be Renewed in Oklahoma?

Can an Eviction Be Reversed?

Does Debt Consolidation Have Risks?

What Happens If You Avoid Getting Served Court Papers?

Does Student Debt Die With You?

Can Debt Collectors Call You at Work in Texas?

How Much Do You Have to Be in Debt to File for Chapter 7?

What Is the Statute of Limitations on Debt in Washington?

How Long Does a Judgment Last?

Can Private Disability Payments Be Garnished?

Can Debt Collectors Call From Local Numbers?

Does the Fair Credit Reporting Act Work in Florida?

The Truth: Should You Never Pay a Debt Collection Agency?

Should You Communicate with a Debt Collector in Writing or by Telephone?

Do I Need a Debt Negotiator?

What Happens After a Motion for Default Is Filed?

Can a Process Server Leave a Summons Taped to My Door?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

Youre Drowning in Debt — Heres How to Swim

Help! Im Being Sued by My Debt Collector

How to Make a Motion to Vacate Judgment

How to Answer Summons for Debt Collection in Vermont

North Dakota Statute of Limitations on Debt

ClearPoint Debt Management Review

Indiana Statute of Limitations on Debt

Oregon Eviction Laws - What They Say

CuraDebt Debt Settlement Review

How to Write a Re-Aging Debt Letter

How to Appear in Court by Phone

How to Use the Doctrine of Unclean Hands

Debt Consolidation in Eugene, Oregon

Summoned to Court for Medical Bills? What to Do Next

How to Make a Debt Settlement Agreement

Received a 3-Day Eviction Notice? Heres What to Do

How to Answer a Lawsuit for Debt Collection

Tips for Leaving the Country With Unpaid Credit Card Debt

Kansas Statute of Limitations on Debt Collection

How to File in Small Claims Court in Iowa

How to File a Civil Answer in Kings County Supreme Court

Roseland Associates Debt Consolidation Review

How to Stop a Garnishment

Debt Eraser Review

Do Debt Collectors Ever Give Up?

Can They Garnish Your Wages for Credit Card Debt?

How Often Do Credit Card Companies Sue for Non-Payment?

How Long Does a Judgement Last?

​​How Long Before a Creditor Can Garnish Wages?

How to Beat a Bill Collector in Court