Clients often want to know about demand letters. They may consider having an attorney send a demand letter before turning it over to collections. Paying an attorney for an hour or two to write a letter is less expensive than a collection agency contingency fee. But, a letter itself may not actually get you paid. It may take a lot more work, which is why we get so many claims after a legal demand has been sent.
1. What’s in a Demand Letter
In the case of collections, a demand letter from an attorney often has:
- A brief review of the history of the relationship
- A description of the debt
- Legal justification for the demand
- A discussion of prior attempts to receive payment
- An official demand for payment and the timing of that payment
- Your next steps in the event that the receiver does not contact you.
Most companies don’t have a lawyer send a demand letter. Instead, they send a demand on company letterhead setting a final deadline for payment before sending the file to a collection agency or attorney. We recommend this approach as we hope our clients can get paid without our services. And it also allows us to remind the debtor that they had a chance to resolve this before we became involved.
2. Courts Like Demand Letters
Generally, you are not legally required to send a demand letter before taking someone to court. However, judges like it when you do. A demand letter shows that you want to resolve the issue and that you tried to do so without involving the court. You should always send a demand letter by certified mail (with return receipt requested) and by regular mail, to provide proof that you made an effort.
3. Demand Letters Can Be Used Against You
If you do go to court, any correspondence becomes part of the case and could be read by a judge. Insulting, threatening, or making unreasonable demands can all hurt your case. You need to be very careful about what you write in a demand letter. If you make an offer in the letter, offering a partial or reduced payment, the judge may ask you to stick with that offer. Make sure that any offer has a time limit. You can also indicate the offer will go away if you have to send the file to collections or the court.
4. You Need to Be Serious
Demand letters are a way to show that you are serious about collections. But for that reason, you should never send one unless you are, in fact, ready to send the file to collections or an attorney. If you send a letter and then do not follow through, your customer knows that they do not have to pay you. It’s important that you take action immediately after the deadline in the demand letter. If you don’t, the debtor is likely to believe they can get away with more stalls and negotiation tactics to get discounts or longer payment plans.
At The Kaplan Group, we start the collection process by emailing a very simple demand letter along with the invoices, statement, and underlying contract. If our client or their attorney has sent a demand letter that details the history of the account, we usually include that as well so everyone has our client’s perspective. If the demand letter was from the client’s outside attorney, we also explain that law firm is no longer involved and that the client came to us because we have a contingency attorney who will take the case if litigation is required. Many debtors think that hearing from a collection agency is less pressure than an attorney. So we have to counteract that thinking by mentioning we actually make it less costly for our client to sue by using a contingency attorney if litigation is required.
Our demand letter lets the debtor know our client is serious, and if the debtor doesn’t work it out with us, then litigation is the next option. We work hard to collect without going to court. That’s why we successfully collect on 97% of our claims without litigation. Contact us for help today.