A demand letter—or debt collection letter—is the first step in collecting a debt that is owed to you. Learn how to use a demand letter and what information to include in it.
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by Brette Sember, J.D.
Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4.
Updated on: January 8, 2024 · 3 min read
A demand letter is a letter that explains why a person or company owes you money and formally requests that they pay it to you. A demand letter may also be referred to as a debt collection letter.
You might need to write such a demand letter to a service person or company, such as a contractor, who took your money and then didn't do the work promised. You might also need to send a demand letter to someone who has sold you a defective product and will not accept a return. Or perhaps your small business has provided a service and a client is refusing to pay you, so you need to collect what you're owed.
Writing a demand letter is an important first step in legally attempting to collect money owed to you. Writing and sending the letter provides proof that you have notified the other person of this outstanding debt and have requested payment.
If you skip this step and go right to court, then the person you are seeking to collect from could claim not to have any knowledge that you're trying to collect the money. In many cases, simply writing the demand letter lets the debtor know you're serious about collecting and they will pay without your having to go to court.
Make sure you type your demand letter so that it is easy to read. Keep your tone polite, straightforward, and businesslike. Include the following details:
Specific to the amount you are seeking to collect, at a minimum, this is the amount of the debt, but you can ask for more if you have had expenses caused by this (and if so, be sure to detail how this additional amount has arisen). Asking for more money creates room for negotiation, but be aware that it might also mean the debtor will simply refuse to pay anything.
Keep several copies of the demand letter and send it certified mail, return receipt requested so you can have proof it was received by the debtor. You can write a debt collection letter yourself or you can hire an attorney to write one for you. Another option is to use an online service provider to help ensure you address all the necessary points.
A 10-day demand letter is a type of demand letter that is sent out by a collection agency on behalf of the person or company who is owed the money. It's basically the same as a demand letter, except that it states that if payment is not made within 10 days, the debt will be handled by the collection agency. Generally, collection agencies charge no fee to the person owed the debt (the person hiring the collection agency) if the debtor pays within this 10-day period. If not, then it becomes a collections matter and the agency will pursue the debt and charge fees for their work.
The Fair Debt Collection Practices Act (FDCPA) applies to debt collectors who attempt to collect a debt. If you as a consumer receive a demand letter from an attorney or debt collection agency, it must comply with this law, which requires that the notice must state it is an attempt to collect a debt and any information obtained will be used for that purpose. As an individual or company, if you seek to collect a debt owed to you personally, you are not required to comply with this law.
A demand letter is the first formal step in collecting a debt. It clearly lays out the amount owed and the circumstances that led to it. Sending a debt collection letter makes it clear that you are serious about collecting on the debt.
Find out more about Business ManagementThis article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.
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