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  • Michael McCulloch

How do I write a letter of demand for payment of my debt?

Updated: Sep 6, 2021

How do I write a letter of demand for payment of my debt?
Using a letter of demand can result in immediate payment of your overdue debts.

A letter of demand is a tool that can be used by a creditor when a debtor has failed to pay money due for goods or services provided and is an important step to take when progressing the debt collection or legal process.

Key Requirements

There are several key pieces of information that should be contained in a letter of demand. These include:

  • who the debt is payable to

  • the amount owed and for what (a service, product or for money lent)

  • when payment is due (usually expressed in business days)

  • how to make payment

  • the fact that you reserve the right to continue action if the debt remains unpaid

  • your contact details

We recommend that supporting documents be attached such as invoices and statements which evidence the amount due. Our free letter of demand is included at the end of this article as a reference tool.

Creditor a person or company that is owed money
Debtor a person or company that owes money to a creditor

What are the Advantages

There are several advantages of using a letter of demand including:

  • providing the debtor with a chance to meet their obligations

  • provides the debtor with a chance to maintain the relationship with the creditor in the event that future credit is required

  • may be used as evidence that shows you have tried to settle the account amicably

  • gives the debtor notice that further action may be taken if the debt is not paid

Are There Time Limitations?

Yes there are. The limitation period differs from State to State which we've covered in our blog article How long can a debt legally be collected in Australia?

Is There a Dollar Limitation?

Generally speaking, there is not a dollar limit that a letter of demand can be issued for however Courts across Australia do have monetary limits which may result in your claim being referred to a higher court. You should speak with a qualified legal professional to discuss any legal action.

Should I send the letter of demand by post or email?

Before sending your letter of demand, you should read any agreement with the debtor to make you are following the correct process. Many agreements will outline the process when an account is in arrears including where correspondence should be sent and how it should be served.

In the absence of any clear process, we recommend that the letter be sent by registered post and a copy by email. If you would like guaranteed delivery, it is worthwhile investigating using the services of a licensed process server who will provide an Affidavit of Service.

The letter of demand has expired. Now what?

Assuming that a response has not been received and payment made, there are several options you could consider such as legal action in the appropriate court, continued attempts to contact the debtor to negotiate payment, outsource the debt to a debt collection agency, forgiving the debt, etc You should obtain your own independent advice from a qualified legal or financial professional as to the option that suits your circumstances best.

Free Letter of Demand Are you a small or medium business? Download and use our letter of demand. Absolutely free of charge.

Download DOCX • 21KB

Disclaimer: This article is general information only and does not constitute legal advice and is not intended to be relied on in any way.

Image Credit: Lucas George Wendt


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