What to Include in a Debt Demand Letter
Demand Letters are the Most Important Part of the Debt Collection Process
For the average small businesses, debt collection isn’t comfortable nor an area of expertise. Most clients pay their bills on time, and as a result the company’s efforts are focused towards the actual business at hand. Dealing with late and overdue payments can be an unwanted challenge for your team, particularly if they’re not well-versed in what they need to do.
The demand letter is one of the most important parts of the debt collection process, and having a good demand letter can help produce results in getting paid, if done correctly. It’s not a guarantee, but a well-crafted demand letter sets forth factual information in a manner that communicates the seriousness of your demand, and the resulting action that may occur if the debt isn’t paid. A demand letter can also be shown in court, should your case end up there, to demonstrate you made a So what makes a good demand letter?
Where to Start with Final Demand Letters
For a start, any demand letter you send, and the manner in which you send it, should be professional above all else. You’re not trying to use angry threats to get paid; rather, you’re communicating your insistence upon getting paid, and what steps you’ll take to do so. Regardless of your personal feelings on the matter, it should stay short, factual, and to the point.
You should include a copy of the outstanding invoice(s) and, if possible, choose an option to send that requires the recipient to sign for or acknowledge delivery to ensure the addressee sees it (even if they ignore it.) Check the contract or terms of the sale for where the notice should be officially delivered and the appropriate manner; in some cases, email may be a viable option.
The heading on the debt letter should identify both the party sending the letter as well as the debtor, to avoid any possible confusion.
Your Final Demand Letter Should Include:
- The reason for the letter. It should seem self-evident, but for the sake of absolute certainty, you should include why the letter is being sent, informing the debtor that their debt is past due, and include a reference to any previous attempts to contact them about the unpaid amount.
- The amount owed. This is the balance on the invoice or bill that remains unpaid; it’s useful to include the invoice number and date as well in the reference line.
- How the debt was incurred. If you provided a good or service to the client in exchange for an agreed-upon price, and have yet to be paid, be sure to reiterate those details in your letter, including any signed contracts or written agreements. Even if you’re certain the other party is aware, you’re writing as much for a mediator or judge who may hear the case as for the debtor.
- Any interest or penalties. The terms of your contract or agreement with the debtor might dictate that past-due balances accrue interest or penalties the longer they remain unpaid; your letter should specify what penalties they’ve incurred, and the full amount due including the initial balance.
- Terms of settlement. If you’re willing to take less than the full amount in order to have the matter resolved, indicate what those terms and what that amount might be.
- Further steps resulting from continued non-payment. Your letter is for naught if there isn’t a reason given for the debtor to take action. Some debtors may have genuinely forgotten, and simply needed the reminder, but for those who have deliberately decided to not pay, a reiteration of what they owe won’t prove any more convincing. In order for your letter to have teeth, you need to detail the next steps in the event of non-payment: referral to a collection agency or legal action with the possibility of going to court.
To that end, there’s no better element of a demand letter than a law firm’s letterhead, or, for that matter, a better decision than working with a debt collection lawyer on your case. Any company can make claims about taking a case to court, but most debtors would bet on their unwillingness to invest the time and energy actually needed to pursue legal action; simply having a lawyer’s letterhead communicates your seriousness and ability to elevate the case to court if necessary.
A LegalShield Attorney is Here to Help You Collect Your Debt
A debt collection attorney can assist you not only in crafting a demand letter but also take much of the work of the debt collection process out of your hands. An attorney’s office can manage the sending of letters as well as the calls and follow-up required in pursuing payment. And any fears over cost should be allayed by the fact that having a lawyer may prompt quick payment, and that without one you risk getting nothing at all.
A debt demand letter, done correctly, should cut through the noise of any potential client dispute to indicate the stakes of the issue, in terms so clear that the seriousness of your request is understood. Your client should know what they owe and when they need to pay, and the actions your lawyer is willing to take on your behalf if they don’t comply. With any luck, you’ll stay out of court, but if necessary, you’ll be prepared to make your case.
If you need help with debt collection, speak with a LegalShield attorney to create a demand letter.
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Speak with a LegalShield Attorney to Help You Manage Your Debt Collection Process