This article provides a template for a debt settlement proposal letter and explains what a debt settlement letter should contain. Many courts require you to formally demand payment before filing your lawsuit, and you'll need the letter to document that you complied with the requirement.Read our Mutual Release and Settlement Agreement template to understand our law firm's procedure in most settlements. If in agreement, the payor can provide payment immediately. However, if the issue involves a small claims court, this could result in a settlement. Payoff of first mortgage loan. 103. Settlement charges to borrower (line 1400). 403. 108. Assessments. 408. Assessments. 205. 505. You may have a debt in joint names, or want to write to your creditors together because you have worked out a joint budget.