Collection Demand Letter

A debt collection letter template is also known as “letter of demand”. It demands the subject of debt to settle the outstanding bill, which is by default, within the certain time specified, and informs him about the total debt amount. 

Often such demand letters are sent from a recovery agency (debt collector agency) on behalf of a creditor to the subjects of debt. Depending on the letter (general reminder/court action informative letter), it can either threaten legal proceedings or inform the second party (debtor) that such actions have already come into operation.

Often demand letters are written to:

While collection demand letters may be written for several causes, most are written when somebody else owes you some money. There is not one single layout for crafting a letter of demand. However, the following guidelines are applicable and will help you to draft an effective collection demand letter. In general, a collection demand letter includes: 

The aim of the letter is often to persuade the other party into paying up, so we advise using a formal tone which will have more impact. However, if the relationship is very personal (friend or relative), it won’t be effective. Before you start compiling the letter, consider the relationship you have with the person who owes you the money. This consideration will help to determine the tone of the demand letter. If you are not going to hire an attorney to do this for you, it’s important to draft the demand letter with a rational tone, and with little emotion as possible, which is based on actual facts.

Note that after this collection demand letter is received, the relationship with this person is damaged, and might never be back to the level as it was before. If this demand letter is sent to a business, contractor, freelancer, individual with whom you may have future dealings, please consider these consequences.

The first part, the introduction of the reason for the demand letter, will be a review of the facts that caused writing this letter.  The facts are the important component and the basis of your demand. Therefore we advise getting the facts straight, which is also a good preparation if this matter ends up in court.

The next part will discuss the services or actions you performed, that caused why the person owes you the money. It can be that you did work for him/her, which was never paid for? Often a demand letter is written because someone borrowed money and the debtor refused to pay it back. Also if personal injuries occur, or if the property is destroyed without having any reimbursement. This section should be flawless, clear, and summarizing.

In the next part, you will outline the consequences of non-payment. Remember here that you catch more flies with honey than vinegar; so you want to be polite and respectful. Considering the collection demand letter is by nature a threatening letter, it’s better to keep the facts straight and there’s no need to express extra aggression. The aim is to reach an agreement, which both parties can live with. 

Instead of threatening to take them to court, you could suggest a meeting to discuss options or perhaps enter mediation. Remember that an angry letter may bring about an aggressive response and further postponement of a resolution. If the aim is to put the matter to rest as fast as possible, writing an offensive demand letter is not a good approach.

Finally, in the last part of the collection demand letter, you should always mention a period of time that this matter must be solved: the deadline. Always consider giving a reasonable time frame that is workable to receive the payment of a debt, or agree to a payment schedule. Make it very clear that he/she must respond to the letter within a set time period. If you leave it ambiguous, you are setting yourself up for further delays.

Make sure you are drafting a collection demand letter that is professional-looking. Now that the letter is written and sent (preferably registered mail) sit back and wait until the offered time is expired. In any case, do not call or harass or try to intimidate the other party.