Someone out there owes you or your business a lot of money. Perhaps it’s a supplier, a customer, perhaps even an associate or friend who is now refusing to pay. Regardless of whether the debtor is disputing the need to pay or claiming to not have the funds, you now have a problem. Obviously, you cannot simply call up the police to report a past-due debtor. No, the responsibility of collecting payment is on you, although the courts will assist if necessary by handing down a judgment in your favor. But before that happens, the first step in collecting debt is to draft a demand letter.
What is a Demand Letter?
A demand letter is, at its essence, exactly what it sounds like: a letter to the debtor in which you formally make a demand for payment of the debt. A well-crafted demand letter will include the following basic elements:
- A description of the amount owed
- How the debt was incurred (e.g. unpaid fees for services rendered)
- The amount of interest or penalties for late payment
- The consequences of not paying (e.g. a lawsuit)
- Any supporting documents such as past invoices or communications
Although the debtor may, and probably should, already know this information, by placing it all in a demand letter, you are giving the debtor a clear notice that you are prepared to take legal remedies to recover your debt, including initiating a lawsuit. You would not file a demand letter with a court (at least not when you send the demand letter), but, by sending it, you are giving the debtor a chance to take the debt seriously and pay up before further steps are taken.
Do I Need an Attorney for a Demand Letter?
With a demand letter, there is not a requirement that an attorney be involved, but having an attorney involved can go a long way towards encouraging prompt payment of the debt. By working with an attorney in sending a demand letter, you can achieve the following benefits:
Show the other party you are serious. Simply having a demand letter on attorney letterhead is often enough to get the other party motivated to settle the matter.
Clearly state your claim for payment. When money, relationships, and failed promises are involved, things can get heated and emotional quickly. No doubt, you’ve already attempted to obtain payment on your own, and yet here you are. An attorney will be able to sort through the arguments and make your clear, legal claim for payment.
It lays the groundwork for a lawsuit. By having an attorney familiar with your dispute and already involved in staking your claim for payment, you can quickly transition into a formal lawsuit for payment if the debtor still refuses to pay.
What Happens After the Letter is Sent?
Once the demand letter is sent, the ball will be in the debtor’s court, at least for a time. The ideal situation is that the debtor simply pays the debt promptly, and that often does occur. But, if not, your attorney can follow up with the debtor to work towards a resolution of the debt, which might include settling the debt, especially when there are disputes over the value of the services or goods underlying the debt. If payment or settlement is not done, then the next step would be to initiate a lawsuit to win judgement against the debtor.
Legal Guidance in Your Pennsylvania Debt Collection
If you are seeking to collect a debt on behalf of yourself or your business, the debt collection attorneys at The Martin Law Firm, P.C. can help. We pride ourselves on being able to assist clients across Pennsylvania and New Jersey in recovering the debts they are owed through the use of demand letters, settlement agreements, litigation, and asset recovery strategies if needed. Contact our office today to get started on your debt collection efforts.