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Five Considerations Before You Use a Payment Demand Letter

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As a business owner, you will likely face this common situation: You worked with a client and did great work. You and your business delivered the products the client desired on time with practically no issues. To request the money the client agreed to pay you, you send an invoice or a bill. Unfortunately, no one responds to your invoice. You try again. Still, there is no response. You try a third time, but they ignore you again. It is then clear that your client has no intention of satisfying the balance. What should you do? 


Sending a demand letter is a typical and often effective method for addressing nonpayment issues. A demand letter is a written notice sent to someone who has not paid a debt. It warns that legal action may follow if the debt is not settled. A demand letter can help you get paid back for a debt. However, there are some key things to think about. Here are some important considerations before sending a demand letter.


1.    Demand letters do not ensure compliance. A demand letter signals to debtors that you are earnest about collecting the owed amount. Prior to receiving such a letter, a debtor might disregard the obligation, hoping it will vanish. However, once they receive formal notification that a claim might be filed against them, many individuals react promptly, but, this is not always the case. Sometimes, demand letters are ignored. Other times, you get a response explaining why the debt is unpaid. When you send a demand letter, be ready to act. Think about what you will do if the person or business does not pay. They might refuse for various reasons, like spite or inability.


2.     A demand letter may be used against you if a legal dispute arises. The phrase “anything you say can and will be used against you in a court of law” is relevant to demand letters. Therefore, it is crucial to be cautious with the wording in your letters. Avoid using a demand letter to make baseless or frivolous threats. Also, it should not be used to threaten anyone with harm or illegal actions. These actions can be harmful and may lead to legal trouble if you are not careful.


3.  It is unnecessary to include every detail or piece of evidence regarding your case in a demand letter. Exercise caution when composing a demand letter to prevent compromising any potential claims. Your letter should steer clear of mentioning specific aspects that might harm your claim. Also, think about whether the information you share could show weaknesses in your case. This might help the other party's position. Out of caution, most demand letters are brief, stating only the facts necessary to provide context and a statement regarding the payment requested. In this case, less is more.


4.  An attorney is not required to send your demand letter. There is no requirement that an attorney send a demand letter. However, letters from attorneys often garner stronger responses. An attorney can also ensure the language of the demand letter complies with the relevant statutory notice requirements.


5. There are legal limitations on how one can pursue a debt. As you attempt to collect a debt, ensure that you adhere to the law regarding debt collection practices. Most states require notice to be given. This notice must include important details. It should state the legal name of the person or company that owes the debt. It must also show the amount owed. Finally, it should explain how the person can check or respond to the debt. If you have any doubts about what should be included, consult with a knowledgeable business law attorney.


Next Steps

If you want to send a demand letter to collect a debt or deal with nonpayment, our firm can help. We help our business clients get their repayments. We understand how to craft an effective demand letter. We also focus on reducing legal risks for your business. Contact our office or fill out our contact form to arrange a consultation with one of our seasoned attorneys. 

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