Collection Demand Letter—When and How To Write It
When a client owes you money for services under an agreement and refuses to pay an invoice, they are in breach of contract. One way to resolve this issue is to send a collection demand letter to the breaching party.
A breach of contract happens when one party fails to perform the terms of an agreement. For instance, you entered into a contract with a client promising to do specific services for compensation. You completed your obligations, but the client refuses to pay, which means they are violating your agreement. Since they failed to honor the very purpose of the contract, they committed a material breach.
A collection demand letter is an official document that serves as a reminder to your client that they owe you money for performed services. It also informs your client about the damages and other remedies you will seek if the matter proceeds to court.
The purpose of a collection demand letter is to:
- Formally inform the debtor that their payment is due—The letter notifies your client about the debt
- Start payment negotiations—You can allow your debtor to create a new payment plan that will work for both sides
If you decide to take the matter to court, a collection letter will serve as proof that the debtor was informed of your demands before any legal action.
There are several types of collection demand letters, and each addresses a specific issue. Consult the table below for a brief overview:
|Type of Debt Collection Demand Letter||Description|
|Reminder letter||The reminder letter is the first letter that you send to your client. You assume that they only forgot to make the payment, or they are facing financial difficulties. A reminder letter is typically sent two weeks after the invoice’s due date|
|Inquiry letter||If your client did not respond to the reminder letter, you should send the inquiry letter to find out the reason behind their late payment. You should not mention legal actions yet, but be polite and professional to keep a good relationship with your client|
|Appeal letter||If the client ignores your inquiry letter, it is time to send an appeal letter. This letter should describe the urgency of the situation while maintaining fairness. You should describe all your previous attempts to contact the client|
|Debt warning letter||A debt warning letter comes after all other letters have been ignored. It is a final collection letter that you send before filing a lawsuit. In this letter, you give your client an ultimatum—pay the debt or go to court|
When writing a collection demand letter, you need to make sure that it complies with the Fair Debt Collection Practices Act (FDCPA)—a federal law that protects clients from abusive practices. The FCPA violations include:
- Requesting a higher payment than what is owed
- Harassing the client
- Threatening the client
Here are some guidelines for writing a collection demand letter:
- Write the name of your client
- Add the amount that your client owes you
- Indicate what action is required
- Set the deadline
- Specify the consequences
There is no need to rely on generic templates or pay sky-high attorney’s fees to get a demand letter. DoNotPay will create a completely customized letter that complies with your state’s laws in a few simple steps.
All you need to do is log in to your DoNotPay account and follow the steps below:
- Select the Client Breach of Contract tool
- Add the required information about your case, such as:
- Client’s name and address
- Amount your client owes you
- Date of your last payment request
- Services you performed for the client
- Set a new deadline for your client
After you provide all the necessary details, DoNotPay will draw up your letter.
Are you wondering about state-specific regulations? DoNotPay provides information regarding breach of contract in various states, including:
|South Carolina||North Carolina||Florida|
If you decide to take your client to small claims court, you should rely on DoNotPay for help. Our AI-powered app can help you by:
- Collecting the required court forms
- Filling out the paperwork
- Filing your claim
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Thanks to DoNotPay, there is no need for back-and-forth communication. We will handle the necessary demand letters and forward them on your behalf.
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