Free Demand For Payment Letter

A Demand for Payment Letter, or Demand Letter for Payment, is a formal, written document detailing a debt owed. A Demand Letter for Payment also outlines how a payor should pay a debt and the consequences if it isn’t repaid by a specific date.

Table of Contents

• What Is a Demand Letter for Payment?
• When a Demand For Payment Letter is Needed
• The Consequences of Not Using a Demand for Payment Letter
• Demand Letter for Payment Common Uses
• How To Write A Demand Letter for Payment
• Sample Demand Letter for Payment
• Demand for Payment Letter Frequently Asked Questions

What Is a Demand Letter for Payment?

A Demand Letter for Payment is a document that informs someone that they are indebted to an individual or company. It includes the reason for there being a debt, methods of debt recovery, and describes what happens if the recipient doesn’t reply or repay the debt before a deadline. 

In many jurisdictions, when first recovering a debt, parties first try to recover it through means other than small claims court or a lawsuit. Think of a demand for payment letter as an initial, non-confrontational approach to recovering a debt.

As a reference, people often refer to this letter by other names:

• Letter of Demand
• Demand Letter
• Demand Letter for Payment
• Final Demand For Payment

When a Demand For Payment Letter is Needed

A demand for payment letter is used when someone owes you money. Remember, every situation is fact-specific and should be approached differently. Here are some common cases where a demand for payment letter is recommended:

1. If you aren’t paid within the time stated in the agreement, a demand for payment becomes appropriate.
2. If you were charged for a service that wasn’t provided or a product that wasn’t delivered, you are entitled to a refund. There is no need to send a demand for payment when a simple phone call suffices. Typically, when companies accidentally charge you, a phone call will rectify the situation.
3. If you’ve contacted the company and explained the situation, and they have indicated they will fix it but haven’t done so in a reasonable amount of time. In that case, a demand for payment may be appropriate.
4. If a company refuses to credit your account and you believe it is fitting that you be credited, a demand for payment may be in order. Ultimately, it would help if you used a demand for payment letter in any case where you believe you have a legal claim regarding a debt owed.

Because your demand for payment will be used in a court claim, be polite, stick to the facts, and clarify your expectations without being unreasonable or disrespectful.

The Consequences of Not Using a Demand for Payment Letter

There are a couple of potential consequences for not sending a demand for payment. The first and most obvious is you may never get paid. Just as you have many things going on in your life, so too do the people that owe you money, and it’s possible they forgot about their debt. Perhaps they assumed their spouse had paid the debt. Without sending a demand letter, you may be leaving money on the table.

Additionally, you may not be able to proceed with a lawsuit if you have not first filed a demand for payment.

When filing a lawsuit, a plaintiff must provide a factual basis for the claim. This solid basis is often identical to the facts listed in the demand letter. Consequently, writing a demand for payment before filing a suit doesn’t create additional work. Instead, it reduces work, as often the letter itself will result in payment, and when it doesn’t, you have the information you need already reduced to writing.

Demand Letter for Payment Common Uses

The two most common situations for using a demand for payment are:

• When someone owes you money, and
• When someone has charged you money for something you didn’t receive (or didn’t receive as advertised).

When Someone Owes You Money

There are both personal and professional situations where a demand for payment might be used when someone owes you money. For example, perhaps you lent someone money. After several months, they stopped paying on the agreed terms. A demand for payment would be appropriate in this situation. Alternatively, perhaps you provided professional services, such as designing a website or building a retaining wall. After sending your invoices with a due date, you hear nothing. This would be a perfect situation for using a demand for payment letter.

When Someone Charged You Money You Don’t Owe

With the internet and automated payments, sometimes, messages get lost. You may be auto-billed for a service you didn’t receive. For example, you may subscribe to a weekly housekeeping service. If your housekeeping professional becomes ill and doesn’t find a replacement, you may have been billed by the billing service, despite not receiving the service. A polite phone call should fix this.

However, sometimes that’s not always the case, and a demand for payment letter would be appropriate. In other cases, you may have ordered something that arrived in an unusable condition. If you belong to the fruit of the month club, you expect to get fruit that is not spoiled. Or maybe you belong to a shaving club that is supposed to send razors each month. If your fruit arrives spoiled or razors broken, the logical first step is to contact the retailer to attempt to rectify the situation.

They could remedy the situation by sending you a fresh batch of fruit, new razors or credit your account. If neither occurs and your contract has clearly outlined the expectations of both parties, a demand for payment may be appropriate.

Sometimes, requests for customer service are handled by employees who don’t have a lot of power or incentive. A demand for payment may be the first time a concern is elevated from a line customer service representative to a manager or a legal team member.

How To Write A Demand Letter for Payment

Step 1 – Include Payor and Payee Information

The payor, or debtor, is the person who owes money to the payee or debtee. You must fill in both parties’ contact information, such as their names and address in the document.

You should also include the contact information of someone the payor can contact if they have questions. This individual could be the person creating the letter or some other individual related to the payee.

Specify the method of communication by listing either postal mail, phone, or email

Step 2 – Fill in Payment Information

Write down the payment information, including information regarding the late payment:

• Payment due amount
• Reason for payment
  • Eg. Rent, purchase, account, etc.
• Original payment due date
• Number of days past due
• Late charges
  • If late charges are attached to the late payment, specify whether the costs are a set amount or a percentage of the original payment amount.
• Number of days the payor has upon receiving the letter to make the payment before the payee takes legal action

Step 3 – Fill in the Final Details

Finally, date the letter and then send it to the payor.

Below is a sample language often included in a demand for payment letter:

Sample Demand Letter for Payment

Below is a sample demand for payment letter you can download in PDF or Doc format.

Demand for Payment Letter

Be sure to send a demand for payment using a method that allows you to obtain proof of receipt. This can be return service requested, certified mail, or through a signature program offered by a private delivery service.

Demand for Payment Letter Frequently Asked Questions