A Demand Letter is also known as:
- Letter of Demand
- Collection Letter
What is a Demand Letter?
A Demand Letter is a formal notice that requests payment or action from an individual or a business. Demand Letters are generally used to resolve a dispute outside of court, with the aim of coming to a quick resolution and saving money on legal fees.
When Should I Use a Demand Letter?
LawDepot's Demand Letter can be used in the following situations:
- To request payment of a debt which is past due
- To request an action, such as asking a contractor to redo their work
- To reach a settlement with an insurance company after an accident
- To secure payment after a debtor's check is returned by the bank due to insufficient funds or a closed account
- To secure payment after a debtor stops payment on a check and you were not paid
What to Include in a Demand Letter:
A letter of demand contains specific information based on why it is being written. In general, an LOD states the purpose for writing the letter, requests payment or action by a certain date, and threatens legal action if there is no response. Any relevant documentation should also be attached.
Here's what to include in specific types of Demand Letters:
A letter requesting a debt repayment should outline the reason for the debt, the amount, and the original due date. If the creditor wishes to settle for a lesser sum, the letter should also provide the terms of settlement, including the amount and the payment due date.
This letter should include a description of the action being requested, such as completing a task or providing a service.
A letter to an insurance company should provide the claim number, date of the incident, and details of the accident, including injuries and hospital expenses. The letter should also include the settlement amount and a deadline to respond.
NSF (Not Sufficient Funds) Check
A letter requesting payment after a debtor's check is returned should include information about the check, including the payment amount, name of the bank, and check number. You can also request reimbursement for bank fees and postage costs.
A letter requesting payment after a debtor puts a stop payment on the check should include the check amount and number, date of issue, and name of the bank. The letter can also demand compensation for bank fees and postage costs.
How to Send a Demand Letter:
You can ensure that your LOD gets into the hands of the recipient by:
- Delivering it by hand
- Hiring a lawyer to deliver it on your behalf
- Having a trusted friend or family member deliver it on your behalf
- Sending it by registered mail, which offers proof of delivery
What is a Settlement?
When a debt hasn't been paid on time, it's often because the debtor is unable to pay in full or within a reasonable period. If that is the case, the creditor can offer a settlement in their debt collection letter.
Settling means accepting less than what the debtor initially borrowed, so that you recover at least a portion of the debt. Considering the cost of litigation, it may be worth your while to settle rather than take legal action to recover your money.
Responses to Expect from a Demand Letter:
The threat of legal action contained in a Demand Letter may be enough to prompt payment or action from the recipient. As a result, you may be able to get what you asked for right away.
The recipient may also respond with a counter-offer. You can accept the offer if you want a quick resolution and the terms are agreeable to you. Otherwise, you can refuse or continue to negotiate.
In contrast, the recipient may ignore your letter. If you do not receive a response by the due date, you can contact the recipient to ensure the letter was received, send a second letter, or commence legal proceedings. If you're uncertain about what to do next, consider speaking with a lawyer.