What is a letter of demand?
A letter of demand is a formal warning that if a debt owed is not paid, the writer intends to issue a court claim against you to recover the debt.
What should I do?
This depends on whether or not the debt is owed.
The following steps ought to be considered:
- Obtain legal advice as soon as the letter of demand is received, to protect your position;
- Consider if full details are provided in the letter of demand to determine what the debt is for and the amount of the debt being claimed. If these details are lacking, contact the debtor seeking the further information required;
- If the debt is owed in full and you are unable to pay the full amount, enter into discussions with the debtor to organise a payment plan to repay the debt gradually;
- If you dispute that the debt is owed, respond by denying the claim and setting out the reasons why it is not payable. Given the costs of litigation if the matter remains unresolved, you may wish to consider a commercial settlement to avoid the costs of litigation;
- If only part of the debt remains outstanding and is disputed, respond by addressing why that part of the debt is disputed, and informing of the amounts already paid;
- If there is a dispute, consider a form of dispute resolution such as negotiating a settlement or attending mediation;
- If the matter resolves by way of negotiation or mediation, it is important to obtain a signed release setting out the terms of the settlement to ensure the debtor cannot claim against you at a later date for the same matter;
- If the matter fails to resolve and court proceedings are issued, contact a litigation lawyer.
What should I not do?
Do not ignore the letter of demand. The debtor will have provided a time frame for responding, after which time it intends to issue a court claim against you. If it follows through with this and issues a formal court claim the costs of litigation accrue quickly. If there is a way to resolve the matter without the need for litigation, this should be explored.
How can I get help?
Commercial litigation and dispute resolution is a service offered by Blossom Lawyers. Contact us if you require help to either write a letter of demand for recovery of a debt, help in responding to a letter of demand, or representation in court proceedings.
Email or call Holly Edmondson at Blossom Lawyers to discuss your legal matter. Otherwise submit a query using the contact us form.
Email: holly@blossomlawyers.com.au
Phone: (07) 5636 5598
