Debt Collection Letter Template and Sample

A debt collection letter is used by many businesses to advise clients and customers that they owe money and that legal steps will be taken to collect what is owed. The following provides additional information about preparing and sending a debt collection letter.

What is a Debt Collection Letter?

The Debt Collection Letter is a formal legal approach to advising clients that they have outstanding unpaid invoices. Further legal action is usually indicated if they do not acknowledge the debt and communicate with you to either pay the amount owed or come up with a plan that is mutually agreeable to repay the debt. You are informing the client they owe you as per previous invoices and in most cases, a friendly reminder is all that is needed. While a small percentage may need to have their collection referred to specialized firms for debt collection.

  • The Debt Collection Letter advises the debtor about the money owed
  • A repayment plan or legal proceedings can be indicated.
  • Always include details about the total debt owed, the initial due date of the debt, and any warnings of legal action.
  • A Debt Collection Letter is usually used by businesses and freelances pursuing non-paying clients.
  • Clients can be other businesses or individual consumer.

How to Write a Debt Collection Letter?

A debt collection letter is a much different letter than many others. While it must be professional and no more than one page, it is also a letter that no one wants to receive. It has its unique format, and it uses simple pointed language to convey the message. Avoid using threatening language in the letter, since threats turn the tables against you in a court of law. Sending and receiving a debt collection letter is more than enough in terms of being threatening.

The letter should be addressed and mailed to the debtor’s business or home address previously provided on official documents.

What to Include in a Debt Collection Letter?

The Debt Collection Letter must comply with Fair Debt Collection Practices in your state and Federally. The letter should include the following information:

  • The amount of the debt ($);
  • The initial date the full amount or payment was due
  • Reference invoice numbers, contract agreements, etc.
  • A new due date or immediately upon receipt of the letter
  • Instructions on methods of payment
  • The name of the creditor;
  • A declaration advising the debtor that if they fail to dispute the amount and the validity of the debt in less than 30 days, it is assumed to be valid by the debtor.
  • If you would like to retain the client, you may express that payment must be made before additional services, or products can be delivered.
  • A reference to transfer to legal collection processes if applicable

Tips and Things to Avoid

  • A client who is late a few days or a week, may not warrant a Debt Collection Letter.
  • If several weeks have passed, one of the first steps is to issue a formal Debt Collection Letter.
  • If a debtor is struggling to make ends meet, a repayment plan may be the answer to both parties. Arranging to make payments each month for a relatively short period may work for both parties.
  • When legal action is warranted due to unpaid debt, the debt collection letter should include the planned legal action if the debtor does not respond within a specified time frame.
  • Always use a business letter format.
  • Make it short, 3 or 4 short paragraphs.
  • Always proofread your job letter of intent.
  • Avoid threatening language in the letter, since negative language always works against you. Sending the debt collection letter is threatening enough since no one ever wants to receive these letters.

Template for a Debt Collection Letter

Your Name, company name, address, and Phone number

Date

The Debtor, Name of the person the letter is addressed to, address, phone number

Salutation

Body – Paragraph 1 – Introduction

Body – Paragraph 2 – Specific details of the debt

Body – Paragraph 3 – Next Steps, Include Payment, Dispute, and Recourse

Closing (Respectfully, Sincerely, Best)

Signature

Your Name printed under the signature

Your Position

Your company

More Details – Debt Collection Letter

Your Name, company name, address, and Phone number

Date

The Debtor, Name of the person the letter is addressed to, (company name if applicable) address, phone number

Salutation: Keep it professional, Dear XXXX, use the appropriate salutation, e.g. Mr., Mrs., Ms.

Body – Paragraph 1 – Introduction: title this section “Debt Collection” and mention the amount. Remind the debtor of the business relationship and a preference to continue the business relationship, however, the debt must be paid before further orders can be processed.

Body – Paragraph 2 – Specific details of the debt: include all of the details associated with the debt. This includes the amount of the debt, the original invoice, the date of the invoice, and that the matter will be referred to a debt collection company.

Body – Paragraph 3 – Next Steps, Include Payment, Dispute, and Recourse: include the date that the debt must be paid before the issue is referred to debt collection. If dispute mechanisms are available or legal references need to be addressed, mention them in the last paragraph.

Closing (Respectfully, Sincerely, Best)

Signature

Your Name printed under the signature

Your Position

Your company

Sample Debt Collection Letter

John’s Company

John Provider

Supply Services

1234 Orange Blossom

Fruitland, CA

12345

XXX-XXX-XXXX

Apr 24,2021

Joe Debtor

Joe Debtor’s Business

5678 Grapeland

Fruitland, CA

12345

XXX-XXX-XXXX

Dear Joe Debtor

This letter is being sent to remind you of the overdue amount owed to our firm for (services or products) provided as outlined on our invoice, dated (D-M-Y). We look forward to furthering business activities with your firm, however, we must suspend further deliveries of services and products until this balance is paid in full.

Amount Due – $XXX.XX

Date of original Invoice: (D-M-Y).

This amount is due immediately. Please send payment as instructed on the original invoice (or provide address here) by (D-M-Y).

If payment is not received by (D-M-Y), this debt will be referred to our debt collection division, and further charges may be necessary to cover debt collection fees and interest charges. If payment has already been sent, please contact us to clarify the situation.

Sincerely,

Your Signature

John Provider

Senior Vice President Sales

Supply Services

Debt Collection Letter (Word Template)

Debt Collection Letter (Word Template)

Conclusion

The debt collection letter should be professional and include all of the pertinent facts related to the debt, the debtor, and the creditor. It should clearly state the amounts and dates associated with the debt and the due dates for payment. Include the next step in the process to ensure the creditor is made aware of what may occur if they fail to repay their debt. If you are suspending the provision of further services or products, indicate this decision in the letter.

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