How to Write an Insolvent Letter

How to Write an Insolvent Letter
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Many of us have those moments in our financial life when we have few resources or no resources with which to pay our bills. The first step you need to take if you find yourself in this situation is to contact your creditors in writing. The term for this type of communication is an "insolvency" letter. You will need a list of your current obligations and your resources and a personal plan for financial recovery.

Create a list of all your financial obligations, including addresses, telephone numbers and the amount owed to each creditor. Rank them in order of urgency.

Write a rough draft of your letter of insolvency. If you have become disabled,you may need to request that the debt be cancelled. If you are unemployed, mention your plan for a job search or education to enable better employment options. Iff you have had a financial emergency, such as unexpected medical or repair bills, ask for a specific amount of time for relief and include a plan for financial recovery. Be careful not to become too specific; make no promises that you do not have the means to keep.

Type or neatly hand write your name, address and phone number in the upper left corner of the page, followed by the date you plan to mail the letter. Skip two lines and write the name of a contact person, if you have one, the name of the company to whom you owe the money and their address. This will identify your letter if the envelope should become damaged in transit.

Skip one line after the business address, and write a salutation. Ideally this would read "Dear Mr. Blank." Be sure to use the correct honorific. Mr. serves for any male recipient, Ms. can cover both Miss or Mrs. If you do not have the name of a contact person, you can say "Dear Creditor" or "To Whom It May Concern." Write out your letter. Complete it with a closing such as "Yours," "Regards" or "Sincerely yours" and sign your name.

Attach your list of financial obligations and resources to your letter. Address legal-sized envelopes. Fold your letter to fit by folding up the bottom one third of the way, making sure your address shows at the top of the page so that it will be the first thing the recipient sees, then fold down the remaining third. Place the letters in the envelopes, attach postage stamps and mail them immediately. The sooner you notify your creditors the more quickly you can begin to make arrangements with them to solve the problem.


  • Keep a copy of all business communications and a record of payments made.


  • Debts that are forgiven are counted as income by the IRS and can be taxed.