Debt collection letter 2024 (guide + free samples)

This post covers everything you need to know about debt collection letter.

I’m going to open this post with three pieces of bad news.

1. Until September 2022, consumer debt is at $16.5 trillion, with the average American debt among consumers at $96,371.(source)
2. Half of Americans consistently struggle to pay their bills on time (source)
3. The Fair Debt Collection Practices Act protects individuals from inappropriate and abusive behavior from debt collectors. (this is good news to the debtors)

I know you are not here for the news, whether bad or good.

However, I wanted you to understand how consumer debt is a problem in America and how the law protects debtors, so it is important to be very careful when it comes to debt collection.

The good news is that I’m here to make your collection efforts considerably simpler by giving you practical, step-by-step instructions on creating a debt collection letter that won’t irritate or alienate a debtor.

If you are a business owner, freelancer, debt collector, or creditor intending to legally collect debts from unpaying clients this post is for you.

Here you will learn;

• What is a debt collection letter?
• Types of debt collection letters
• Why do you need a debt collection letter?
• How to write a winning debt collection letter
• Debt collection letter template
• debt collection letter from lawyer
• Strategies For Effective Debt Collection-bonus

Related:

• Debt validation letter (guide + free samples)
• Debt acknowledgement letter (guide + free samples)
• Letter for debt settlement (guide + free samples)

What is a debt collection letter?

A debt collection letter is a brief statement of facts written by a creditor or debt collector to non-paying clients to inform them about their outstanding debt, a deadline for payment, and what will happen if they don’t pay.

To be in compliance with Fair Debt Collection Practices, the debt collection letter must include the following:

• The amount owed ($)
• The name of the creditor
• A statement telling the debtor that if they do not contest the debt’s legality within 30 days, it will be presumed to be valid.

Types of debt collection letters

Generally, there are four (4) types of debt collection letters that you can send to your debtor depending on your situation i.e Reminder letter, Inquiry letter, appeal letter, and final demand.

Reminder letter-Stage 1

This is the initial notification that you send to a client. It is also frequently referred to as a “soft letter.”

Although it is ideally only necessary to send one reminder letter, it might occasionally take up to three before you must file a lawsuit.

On the grounds that the debtor is likely to have forgotten to pay, the letter of reminder is frequently sent 14 days after the invoice’s due date.

Inquiry letter- Stage 2

This is your second correspondence with the debtor.

This message serves only as a follow-up to inquire about the debt.

This is your second correspondence with the debtor.

This message serves only as a follow-up to inquire about the debt.

This is where things get more complicated if not more serious because you’ve sent a reminder and no positive response.

Appeal letter- Stage 3

This is the third letter you might send to your rude client.

If you’re in the third stage of the debt collection process, you’ve reminded the client and made an appeal to their better nature, but they’re still resisting your demand.

It’s time to act strong and underline the gravity of the circumstance by implying the adverse consequences.

Final demand- Final stage

This is your last shot.

You get three strikes and you’re out, as the saying goes.

This is the last letter of demand before you start legal action because the client hasn’t paid despite mild and not-so-soft reminders.

This is also known as the ultimatum collection or final collection letter.

Why do you need a debt collection letter?

You need a debt collection letter for the following three major purposes

First; To inform debtors that they owe you money

This is the most obvious reason, and a debt collection letter is a way to establish in writing that the debt exists, the amount owed, and that you would like it paid by a certain due date.

Remember that your client may not be trying to avoid paying an invoice; rather, it may have simply slipped their mind.

Consequently, sometimes all it takes is a simple reminder.

By initiating dialogue to achieve a fair resolution for your client and your business, this letter can assist in resolving client debts.

Second; To initiate a payment process

If your client hasn’t made the required payment, they might be having cash flow problems.

In this situation, a debt collection letter might propose a payment schedule to ensure that you receive payment, even if it’s not all at once.

A payment schedule might be a tactic to ensure that you receive payment in a way that you and your client can accept.

Furthermore, your client will perceive that you give their needs priority, which might help you keep a better client relationship.

Third; To alert about further legal proceedings

Unfortunately, there are times when the only way to get your hard-earned money back is through legal mechanisms.

You may choose to sue a client, employ a collections agency, or report the client to a credit reporting agency.

In those circumstances, a formal debt collection letter may be used as evidence that you tried to inform the client of the unpaid debt—and that the client refused to pay.

How to write a winning debt collection letter

A debt collection letter is written in a business letter format. Begin your letter with your address and contact information, followed by a date and the debtor’s address, and state that you are writing to inform him about his outstanding debt. State the amount owed, a deadline for payment, and what will happen if they don’t pay.

Finish with “Sincerely,” followed by your name and signature.

REMEMBER! the main purpose of your debt collection letter is to get the debtor to pay your money.

Therefore, to write an effective debt collection letter, do the following.

• Include your name and contact information
• Include the date of the letter
• Include the debtor’s name and address
• If you are writing as a collection agent, include the name of the original creditor
• Specify the amount and provide proof of the debt in question (attach necessary documentation, order form, invoices, etc.)
• Include instructions on how to pay the debt
• You may indicate that a payment plan can be arranged if needed
• Clearly state the next steps you expect from the client.
• Provide a deadline to make it clear when you expect a response and when you expect to receive their payment.
• Explain what will happen if you don’t receive a response and/or payment by the deadline you’ve set.
• Include a statement telling the debtor that if they do not contest the debt’s legality within 30 days, it will be presumed to be valid.
• Don’t be harsh and threatening.
• Maintain a professional tone
• Be honest

other useful tips

• Send your letter by certified mail with a return receipt requested so you know when and if the debtor receives it.
• Keep a copy.

Debt collection letter template

The following is the template of an effective debt collection letter that you can send to a debtor regardless it is your first or 100th attempt.

Your Name
Your Address
City, State, Zip Code
phone
email

or

LETTERHEAD

DATE

[Debtor’s Name]
[Debtor’s Street Address]
[Debtor’s City, State, and Zip Code]

Dear [Debtor last name]

This is a gentle reminder that the accompanying invoice/bill for [outstanding amount] is now past due. Therefore, we would appreciate it if you could make this payment as soon as you can.

PLEASE SEND PAYMENT TO [address or bank details]

Kindly get in touch if there is a mistake on our end and payment has been completed so that the situation can be urgently fixed. 

We are not sorry to inform you that this collection will be turned over to our debt collection agency/lawyer if payment is not received by [due date]. We kindly ask that you get in touch with us right away to make a payment or arrange an alternative before this date because this debt could negatively impact your credit score.

Please note that you have the right to contest this debt in writing within thirty (30) days of receiving this letter. The collection shall be deemed accepted by the debtor if this letter is not disputed within the allotted thirty (30) days.

Sincerely

Signature

Name

Debt collection letter pdf

Debt collection letter from lawyer

A debt collection letter from lawyer is a formal notification that a lawyer or law firms send to a client who hasn’t paid their bill by the due date.

It notifies the recipient of their outstanding debt, asks them to make payment by a specific date, and tells them what will happen if they don’t.

It’s possible that a minor error or misunderstanding led to the client failing to pay your legal firm’s invoice.

By informing the client of the remaining balance, the following clear attorney collection letter can be sent in these situations to swiftly and professionally resolve the matter.

Lawyer Name
Law firm Address
City, State, Zip Code

or

LETTERHEAD

DATE

[Client’s Name]
[Client’s Street Address]
[Client’s City, State, and Zip Code]

Dear [Client’s last name]

This is to inform you that your amount of [$ Amount Overdue] for invoice [#] for [service supplied] completed on [complition date] was due on [due date] and is now [# of days now overdue]. Please be aware that, according to our engagement letter, any amounts not paid within [#] days of their invoice date will be subject to a monthly interest charge of [#%].

As a result, your total current debt due is [Provide entire amount owed] plus $# for one month of 1% interest).

I’d appreciate it if you could react to this mail and provide your money by [last payment date]. If paying this outstanding sum or paying it in full at this time is difficult, please contact me to negotiate an alternative payment arrangement.

Please be informed that if I do not receive a response or payment by [due date], I may opt to pursue this late payment through legal means, including filing a lawsuit.

Sincerely

Signature

Name

Debt collection letter from lawyer pdf

Strategies For Effective Debt Collection

The following strategies will assist you in increasing your chances of success in your collection efforts.

Put yourself together

Make sure you know as much as you can about a delinquent customer before you initiate contact with them. Make copies of all contracts, invoices, and other documents that will enable you to communicate with the client in a professional, respectful, and personal manner.

Be a record keeper

If your organization uses tracking software, enter all the information into the program as soon as possible. Continue to update your file over time by adding any new information to make it as current as possible.

While discussing the outstanding debt with the customer take thorough notes of everything that was said, including the customer’s comments in case there is a future debt dispute.

Assumption is an enemy

Do not assume that the debtor knows that he owes you money.

Verify right away that the debt hasn’t been paid when you make the first call in a debt collection attempt. Avoid offending the customer.

Keep in mind that you might do business with the customer again. It’s possible that the disputed debt is a mistake and not even a collection issue.

At this point, use caution when choosing your words and tone.

As you wait and pay attention to the client’s remarks, make sure to accurately and thoroughly record the conversation.

Self-control is a master key

The effectiveness of the conversation may depend on the tone you use when speaking.

The customer might respond more favorably if you strike up a polite, non-confrontational dialogue right away.

Ask if there is anything you can do to help after making sure you are speaking to the right person about the unpaid invoice.

Inquire if they require any further details.

You might be able to stop the person from getting defensive if you show that you are interested in or understand the debtor’s perspective.

But keep your distance from the circumstance. The goal is to recover the full amount owed as quickly as feasible.

A debtor is also a human being

Make an effort to determine the validity of the debtor’s justification for nonpayment. If the person, for instance, says that someone else is to blame for the non-payment, you can find out whether this is true or false by getting in touch with that person.

As you pay close attention to what the individual is saying, try to determine whether or not they are being completely truthful with you.

Follow your instinct.

Even if the debtor becomes belligerent throughout the contact, always attempt to maintain composure.

Always pay close attention to what the customer has to say and make an effort to keep the conversation as beneficial as possible.

It’s crucial to give the debtor the impression that he is moving forward.

Remember the plan B

It can be conceivable for a consumer who is having problems paying off debt to make payments over time.

Try to come up with a strategy that will benefit both of you.

The objective is to obtain the customer’s prompt payment of the total amount.

As soon as a feasible solution is determined, pay close attention while offering possibilities.

Terms and condition applies

Once a payment schedule has been established, set the terms and conditions.

Give the debtor a verbal rundown of the payment schedule.

This description should be explicit about the timing and mode of each payment to be made by the debtor.

After then, put it in writing by sending a letter, email, or fax. Request a call or email from the debtor as soon as they make payments.

Follow up

Even if the debtor is unable to pay right away, it is crucial to maintain contact. He could be able to make payments in the future, and by speaking with him and paying attention to what he has to say, you might be able to give him advice on how to start making payments right away.

While it is more difficult to collect on debt as it becomes older, there are times when circumstances change and payment may be feasible.