How to Send a Demand Letter If Someone Owes You Money

How to send a demand letter if someone owes money

It can be a terrible feeling when someone owes you money and you start sensing they’re giving you the runaround. Someone – or maybe a company – may owe you money for a variety of reasons. Perhaps you made a loan, performed a job, sold an item or are owed for damages to your person or property. 

If the other side is ignoring you or simply refusing to pay, this article will discuss how a demand letter can help recoup what is owed to you. We will also discuss how you can have a lawyer send a demand letter for a reasonable flat fee. 

Benefits of Sending a Demand Letter for Payment

In essence, a demand letter is a formal letter that puts the other side on notice and states your demand for payment. It may follow more informal attempts to collect by calling, texting, or emailing. The goal of a demand letter is to resolve the dispute immediately, without resorting to further conflict or lawsuits. The letter may also be used later as evidence should you proceed with more serious actions.

You may have previously attempted to collect on payment, but a demand letter, especially one sent by an attorney, will let the other side know that you mean business and are considering serious action if payment isn’t received. 

A demand letter demonstrates that you are willing to spend time, energy and resources to be paid what you are owed. If you are dealing with a company or an organization, sometimes a demand letter has the benefit of alerting an owner or someone in a managerial role who was unaware of the dispute if you were previously dealing with someone lower in the chain. The other side may also not have considered the debt to you a priority and the demand letter will motivate them to expedite payment. 

In a best-case scenario, a demand letter can cause the other side to pay and resolve the dispute immediately. This is beneficial for both sides – it spares the considerable time, expense, and stress of being involved in a continuous dispute and potential litigation. 

Do You Need a Lawyer?

A demand letter for payment can be sent by yourself or a lawyer. However, a demand letter sent by an attorney is much more effective. Using an attorney will command the attention of the other side. That’s especially true if you have tried to collect payment multiple times and have been ignored. It’s unlikely at that point they’ll pay up simply because you send them a formal demand letter signed by yourself.  

Using a lawyer will certainly cost you more than sending the letter yourself, but it’s strongly recommended for a few reasons:

  1. The lawyer will be experienced in how to write an effective demand letter. 
  2. Establishing a relationship with a lawyer can be beneficial if you want to sue later. 
  3. The recipient will take the letter much more seriously if it’s from a lawyer.
  4. A demand letter can be a cost-effective way to resolve a payment dispute, without resorting to costly litigation.

The hardest part about using a lawyer to send a demand letter is finding one to do it for a low fee. It can defeat the purpose of sending a demand letter for payment if you’re paying hundreds or thousands of dollars for a lawyer to send your demand letter. 

Demand Letters can connect you to a lawyer that will craft and send a demand letter on your behalf for one low flat rate, with no hidden charges or fees. This is a great alternative that may potentially resolve your issue without breaking the bank or resorting to an expensive and time-consuming lawsuit. 

Writing a Demand Letter for Payment

An effective demand letter should contain a few important elements and carry a certain tone. Emotions regarding the unpaid amount may be running high on both sides, but it’s important for the demand letter to have a professional, factual tone. 

The letter should have just enough detail to effectively get your point across but should be concise and not ramble on with extraneous opinions or feelings. It’s counterproductive to take an accusatory or insulting tone, even though you may feel you’re being wronged. Even if the other side is being nasty, it’s better to take the high ground. 

A demand letter for payment should have the following characteristics: 

1. Describe the Situation

Your demand letter should have a clear description of the amount owed and why it’s owed. It should establish precise dates and numbers, the parties involved, and previous attempts to collect the money owed. If there is evidence to show the amount is owed to you (for example, an invoice, a written IOU, a timesheet, an email, a text, etc.), mention that as well. 

2. Make Your Demand for Payment

State the exact amount you are looking for in order to resolve the issue. If you’re willing to take a lower amount to settle the issue or accept payments over time, you can offer those terms in a demand letter as well. 

3. Maintain a Professional Tone

Avoid using inflammatory or threatening language. Emotions may be running high, but it won’t help your case to be combative which may cause the other side to further retreat. In addition, it’s never a good idea to threaten anyone verbally or in writing. The letter might be used as evidence later, and you want to put your best foot forward. Don’t distract from the issue at hand by describing your personal feelings and opinions on the matter.

4. Set a Deadline

Give the party a deadline to pay the amount before you take more severe action. You can also indicate that you are planning to file a lawsuit if payment is not made before the deadline.

5. Send the Letter by Certified Mail or Another Trackable Method

You will want a record that your demand letter was sent and received by the party. Certified mail or any other physical delivery method with tracking and delivery confirmation is ideal. If you don’t have a physical address to send the letter to, you can also send a demand letter by email. 

What to Do If They Ignore the Letter

If your demand letter is ignored, or they acknowledge the letter but simply refuse to pay, there are a few options you can pursue:

  1. File in small claims court,
  2. File a lawsuit or
  3. Take a loss.

We’ll discuss each of these options and their merits.  

1. Small Claims Court

Depending on the amount that is being disputed, you may be able to use a small claims court in your jurisdiction. Small claims court is intended as a forum where smaller disputes can be resolved quickly without the expense of attorneys. 

There is a limit to how much your claim can be to qualify for small claims court depending on the state you live in. The maximum amount allowed can be anywhere from $2,500 to $25,000. 

If you choose to proceed in small claims court, it will still have been helpful that a demand letter was sent for a couple of reasons. First, the demand letter gave your debtor a chance to make things right and avoid going to court. Second, a small claims court may require you to formally ask the other side for payment before you can proceed, and the demand letter will serve as evidence of this.

You should submit a copy of your demand letter with your court papers and bring it to any hearing as proof that the debtor was on notice. 

2. Filing a Lawsuit

If the amount that you’re owed is greater than the small claims limit, you can sue the other party through the regular court system. The downside of filing a lawsuit is that it can be very time-consuming and expensive.

If an attorney helped you draft the demand letter, they may also be able to represent you in a lawsuit to collect what you are owed. A demand letter can serve as documented proof that you put the other side on notice regarding the delinquent payment and gave an opportunity for them to remedy the situation before going to court. 

3. Take a Loss

The last option, just taking a loss, is obviously not ideal but sometimes letting go of a dispute is the best choice. Filing a lawsuit can be draining and expensive, and there are no guarantees in the end that you will collect. Even if you do collect, the amount may be greatly reduced by legal fees and the cost of your time. 

Writing off a debt owed to you is never pleasant, but sometimes it can save you further headaches and losses in the long run. You should be honest about how much time and money you’re really willing to expend to pursue the matter, and whether it’s really worth it.

A demand letter sent by an attorney is a great option because it’s more cost-effective than pursuing legal action right away, and there’s a chance the other side will come around and pay up. If the demand letter fails, you may decide the matter isn’t worth pursuing any further and that you’ve given it your best shot. The cost of sending a demand letter will have been minimal compared to suing. 

It’s never pleasant to lose what is owed to you, but you can have peace of mind knowing that you did all that you were willing and able to do by sending a demand letter.

Final Thoughts 

If you’re dealing with a dispute regarding payment owed to you, a demand letter is something you should seriously consider. Anyone can send a demand letter, but a letter sent by an attorney will be much more effective and get the other side’s attention right away. 

Demand Letters connects regular people and small businesses like yourself with attorneys who can draft and send a demand letter for a low flat rate. Just click on the link below to get started. 

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