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Settlement offer letter.

Offer a collector one payment to close a medical debt, and get the deal in writing before you send any money. The collector does not have to accept, and two risks come first: a payment can restart the time limit to sue in some states, and a settled balance may be reported as cancelled debt.

Last updated .

When to use it

  • A collection agency or debt buyer is collecting a medical debt that you have checked and think you owe.
  • You can pay part of the balance at once, but not all of it.
  • You know whether the debt is past your state's time limit for a lawsuit, and you accept the risks below.

The letter

Warning

A payment can restart the clock. Every state sets a time limit for suing over a debt. In some states, a payment or a written promise to pay can restart it, even on an old debt Source 1. If this debt is old, check your state's time limit before you send this letter or any money. Our guide to the statute of limitations explains how, and a legal aid office can help.

A settled balance may be reported as cancelled debt. If a collector takes less than the full balance, the part you no longer owe may count as income on your taxes Source 2. "What happens next" below explains this.

Highlighted words in brackets are blanks. Replace each one with your own details.

[Today's date]

[Collector's name] [Collector's mailing address]

Re: Offer to settle this account Reference number: [Reference number on the collector's notice] Original creditor: [Hospital or provider named in the notice]

To whom it may concern,

I am writing about the account above. Your notice dated [Date on the collector's latest notice] lists a balance of [Balance on the notice].

I offer to pay [The amount you offer, as one payment] in one payment to settle this account in full. I can send the payment within [Number of days you need to send the payment] days after I get your written acceptance.

If you accept, please send me a letter that says:

1. You accept [The amount you offer, as one payment] as payment in full, and I will owe nothing more on this account after you receive it. 2. You own this debt or have the right to settle it. 3. No one will try to collect the rest of the balance, and you will not sell or transfer it. 4. What you will report about this account to the credit bureaus, and whether you will report any of it to the IRS on Form 1099-C. 5. How and where to send the payment.

I will not send any payment until I have that letter. This offer ends on [Last day for the collector to answer] if you have not accepted it in writing by then.

This letter is an offer to settle. It is not an admission that I owe this debt or that the amount is correct, and it is not a promise to pay unless you accept it in writing.

Please contact me about this account in writing only, at the address below.

Sincerely,

[Your full name] [Your mailing address]

How to send it

  1. Check that it is a collector. If the bill is still with the hospital, start with our phone script or our hardship letter instead. A nonprofit hospital may still accept a financial assistance application, so ask the hospital as well as the collector.
  2. Check the debt. Make sure it is yours, the amount is right and this company has the right to collect it. Our debt validation letter asks for that proof. If you dispute in writing within the dispute period, the collector must pause collecting the disputed amount until it answers Source 3. That period lasts 30 days (CFPB, published January 29, 2024).
  3. Decide what you can pay. Offer only an amount you can send in one payment by the date you name, and keep enough for rent, food and other needs. We don't suggest a percentage, because we have found no reliable data on what collectors accept.
  4. Fill in every blank. Use the reference number and the address on the collector's latest notice. Give the collector time to answer, and give yourself enough days to pay.
  5. Send it in a way you can prove. Certified mail with a return receipt gives you a record. Keep a copy of the letter, the notice and the receipt.
  6. Do not pay until you have the collector's answer in writing. Then pay exactly what its letter says, by the date it says, in a way that leaves a record and does not give the collector access to your bank account or card.

What happens next

The collector may accept, say no or ask for a different amount. It does not have to accept, and nothing in this letter can make it.

  • If it accepts, check that its letter names the account and the amount, and says the payment closes the account. Keep that letter and your proof of payment. They are your record if anyone tries to collect on this account later.
  • If it says no or asks for more, you can make another offer, ask for a payment plan you can keep, or stop there. Do not pay until any new terms are in writing.
  • Your credit report. The three national credit bureaus leave paid medical collections off credit reports Source 4. Ask the collector what it will report about a settled account, then check your reports for free at AnnualCreditReport.com Source 5. If something is wrong, use our credit report dispute letter.
  • Your taxes. Cancelled debt is generally taxable income. Being insolvent, which means owing more than everything you own is worth, can keep it out of your income Source 2. Some companies must report a cancelled debt to the IRS on Form 1099-C: banks, credit unions, certain federal agencies and companies whose main business is lending money. The form is required once the cancelled amount reaches $600 (IRS, Instructions for Forms 1099-A and 1099-C, Instructions rev. April 2025) Talk to a tax professional if you are unsure.
  • If you get court papers, respond by the date on them, even while you negotiate. A legal aid office can help.

If a collector breaks the rules, you can complain to the Consumer Financial Protection Bureau at consumerfinance.gov/complaint or by phone at 1-855-411-2372 Source 7.

Next step

How to negotiate a medical bill

General information, not legal or tax advice.

If you need help with your own situation, these can help:

  • LawHelp.org lists free legal aid near you.

  • Your state attorney general takes complaints about medical bills and debt collectors.

  • The CFPB complaint portal takes complaints about debt collectors and credit reports.

  • The hospital's financial assistance office can review your bill and tell you what it offers.

Sources

  1. Note 1 CFPB, "What is a statute of limitations on a debt?"; 12 CFR 1006.26(b). Published October 28, 2026. Last checked November 2, 2026.

  2. Note 2 IRS Publication 4681 (2025). Published 2025. Talk to a tax professional if you are unsure. Last checked November 2, 2026.

  3. Note 3 CFPB, "What information does a debt collector have to give me about a debt?". Published January 29, 2024. Last checked November 2, 2026.

  4. Note 4 Equifax, Experian and TransUnion joint release. Published March 18, 2022. Last checked November 2, 2026.

  5. Note 5 FTC, "Free Credit Reports". Published June 2026. Last checked November 2, 2026.

  6. Note 6 IRS, Instructions for Forms 1099-A and 1099-C. Published April 2025. Talk to a tax professional if you are unsure. Last checked November 2, 2026.

  7. Note 7 CMS, "Dispute a bill". Published October 2, 2026. Last checked November 2, 2026.

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