Debt Settlement Agreement
Settle a debt for an agreed amount and record that the matter is closed once it is paid.
Agree the terms on which a debt will be settled.
- Personal & business / Legal document
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Key features
The debt and the settlement amount
What the debt arises from, what the creditor says is outstanding and the figure that will settle it.
Nothing admitted
A choice on whether the debtor admits the amount, and a statement that the agreement is not an admission beyond what it says.
One payment or instalments
Due dates, instalment amounts, the final payment and how it is paid.
Release once paid
Once paid in full, the creditor releases the debtor from the rest and takes no further step to recover it.
Missed payments and the record
What happens after a missed payment, steps the creditor will not take while paid as agreed, and written confirmation and record-keeping once settled.
About this document
A debt settlement agreement records that a creditor and a debtor have agreed to settle a debt for a stated amount, paid in one sum or by instalments, and that once paid in full the creditor releases the debtor from the rest. It also says what happens if a payment is missed.
This blank form leaves every amount and period blank. The debtor may admit or not admit the debt, and the form says nothing is admitted beyond what it states. Settling a debt can have credit, tax and legal consequences that differ by state, so consider advice, especially for large sums.
Is this document right for you?
Useful when
- You owe money and have agreed to pay less than the full amount
- You are owed money and prefer a certain, smaller payment to a dispute
- You want written confirmation that the debt is closed
Commonly used by
- Individuals and small businesses
- Creditors and debtors in a dispute
- Families settling an old debt
Not sure? about your situation first.
Alternatives
These are separate documents, for different jobs.
- Demand lettersFormally ask for payment or action before going further.View document
- Promissory notesA written promise to repay a sum of money.View document
- Personal loan agreementsPut money lent between people on clear terms.View document
- Personal dispute consultationTalk through a personal dispute with a lawyer.View document
When to use this
- A debtor offers a lump sum to settle an account
- Two parties agree instalments to close a dispute
- A creditor agrees to stop recovery while payments are made
What happens next
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More in Demands, Debt & Disputes
- Complaint LetterPut a complaint about a product or service in writing.View document
- Demand lettersFormally ask for payment or action before going further.View document
- Bill of SaleRecord the sale and transfer of an item from seller to buyer.View document
- Invoice FormBill a customer for goods or services provided.View document
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Questions
About the debt settlement agreement
Possibly. How a settled debt is reported depends on the creditor and on the rules where you live. The form has a blank for what the creditor will do about its own record.
Still have a question? .