A Letter of Demand can be used to formally demand recovery of a debt owed to you following the supply of goods or services. Use this Letter of Demand after a person or business has failed to reply to your previous requests for payment and you intend to commence court proceedings over the claim.

Use this Letter of Demand if:

• You would like to formally request payment for an outstanding debt;
• You have made previous attempts to recover the debt; and
• You are preparing to take legal action over the outstanding amount.

What does the Letter of Demand cover?

• Date of the Letter of Demand;
• Amount of the outstanding debt owed;
• Date the debt was due; and
• Description of what the debt is owed for.

Other names for Letter of Demand include:

• Debt Recovery;
• Demand for Payment; and
• Debt Collection Letter

What’s the difference between a Letter of Demand and a statutory demand?

A Letter of Demand (Debt) can be used to formally demand recovery of a debt owed to you following the supply of goods or services. A statutory demand is a document sent by a creditor to a debt company requesting the debt be paid within 21 days. It is worth noting that a statutory demand is a frequent source of litigation, and can only be issued when the due debt is over $2,000.

At what point should I issue a Letter of Demand?

A Letter of Demand is usually sent when numerous attempts to get your invoice paid have been unsuccessful. A Letter of Demand warns the other party that your demand for payment of outstanding money is the final opportunity before you take the matter further.

What response should I expect from a Letter of Demand?

A response to a Letter of Demand may include the following:

• admission to an owed amount and a date in which debt would be paid;
• a request for further clarifications on the amount owed;
• a denial to owing the requested amount;
• an offer to pay a different amount; or
• an offer to pay the amount in instalments.

Should a Letter of Demand be sent from a lawyer?

A Letter of Demand officially informs the debtor of your legitimate claim for payment and intention to take legal action if the debt is not paid. The lawyer can make sure the letter is professionally written to elicit compliance and assure claims are legitimate if the letter to be used as evidence in later court proceedings. Another benefit to having a lawyer draft your letter of advice is the firm’s letterhead. A firm’s letterhead is a powerful persuader for the debtor to pay their debt promptly and assure it is taken seriously.

Other documents you may need:

• Letter of Demand (2nd Attempt)
• Letter of Demand (Final Attempt)

Further information

• Steps to take to Collect your Small Business Debts
• What is the difference between a secured and unsecured loan?
• What tax can I expect to pay if I’m self-employed?
• Loan Agreement (Lender to Borrower) Sample