How to Write a Pre-Legal Letter of Demand for Debt Collection

How to Write a Pre-Legal Letter of Demand for Debt Collection

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After you have sent your initial invoices and follow up emails, but still not received payment, it’s then time to get serious. This is where you need to know how to send an effective Pre-Legal Letter of Demand. I have previously shown you how to write your own debt collection letter here: 

See Here: How to Write your Own Debt Collection Letter

And you can get your free letter of demand templates here 


Get Your Free Templates

So assuming these have not worked, you can now send a Pre-Legal Letter of Demand. This is a more formal approach. It’s recommended that you are guided by your lawyer on this one, however, using this guide, you can certainly do it yourself. You must send a formal Demand before you can lodge a claim for your debt with the court. This whole process you can do yourself without the aid of a lawyer and save substantial fees but you must follow a set legal process.

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    This process applies to both personal and business debts. Following is a step-by-step process to send your Pre-Legal Letter of Demand:

    Some legal stuff first

    A Letter of Demand should not be used for loss or damage, but only for debts owed for goods or services rendered. For example, if somebody damages your property and you want them to pay for it, you cannot use a Letter of Demand. You also have to be aware there are time limits on collection of debts. There is a six year time limit (three years in the Northern Territory) to collect the debt, starting from the date when it became due. However, if the debtor at some point acknowledges the debt and gives a written promise to repay it, the time limit resets and starts again from the date of the written promise.

    see also: How to write your own debt collection letter better

    Writing the Letter

    Your Pre-Legal Letter of Demand must include the following:

    • Who you are (you are obliged to announce who you are, or who you are acting on behalf of. )
    • Description of the debt (such as what the money is owed for), and any relevant evidence such as contracts, invoices, emails agreeing to work or other written agreements that you have with the person/company you are claiming the money from.
    • Amount of the debt
    • Date the debt was due
    • Date of the Letter of Demand
    • Date the payment is due
    • Consequences of non-payment (may include legal action, penalty fees and/or interest)

    Choose your words carefully

    It is very important to date your Letter of Demand so the debtor knows what the deadline is, especially if you are intending to follow through with court action. It should be clear, concise and in plain English. Simply state the debt, when it was incurred, what it was for, confirm it still has not been paid and make mention of previous communication which have gone un-answered. Ensure you attach an proof of debt, such as invoices or contracts. Don’t forget to clearly state the consequences of non-payment. E.g that you may go ahead with court action against the debtor, after the payment period has expired, without further notice to the debtor. You should be clear about your intentions if payment is not made.


    Send your Letter of Demand

    These letters of demand should always be both emailed and sent by mail. When emailing, ask for a read receipt. When sending in the mail, send it by registered post and this will prove it was received.

    If you do follow through with court action, you will need to provide evidence to the court of receipt of the Letter of Demand. You need to demonstrate to the court that you have communicated with the debtor that the debt is due and that you have attempted to settle this debt, and you also need to demonstrate that the debtor has knowledge of the debt being due.

    Ensure you keep evidence of all communications you send to the debtor, including phone calls and texts. 


    Waiting period

    You would already have sent at least two letters of demand before this more formal letter, so now a reasonable time period, before beginning court action, would be 7-14 business days to pay the debt. You need to be able to show the court you have tried to be reasonable and give a reasonable time-frame. If you only intend to send one letter and it’s your Pre-Legal Letter of Demand, you should consider providing 21 days for the debtor to pay.

    Irrespective of the number of letters you send, you should give the debtor a total of at least three weeks to pay before starting court action. This gives the debtor a fair opportunity to respond and also gives ample time if they are away.

    You must wait a minimum of 21 days, then further action can be commenced. 21 days is suggested to give an adequate amount of time for the debtor to organize payment, negotiate with the creditor or to find an alternative arrangement.


    Still Not Paid?

    Once you have gone through all these steps and still not received payment, you can then proceed with a Statement of Claim. It’s best to get your solicitor to take over from this point, however, if you want to know the general costs involved and the process, you can check the State court websites to ensure you understand any and all recoverable amounts prior to taking any action. The recoverable cost of serving a Statement of Claim is capped by each State and the service fees vary from State to State depending on a number of variables, including service distances.

    For example, if the debtor is out of State or is out of the country, serving them with the Statement of Claim can be costly. In addition, there is a time limit for service which must be met as a Statement of Claim must be served within 6 months of filing your claim.

    Normally the Statement of Claim must be served within six months of the claim being lodged in court. Once the debtor is served with the Statement of Claim, they will have 21 or 28 days to respond, depending on your location.

    If the debtor doesn’t respond within this time, your solicitor can then apply to the court to have a default judgment in your favour, which means there is no need for a hearing. However, your solicitor must make this application within nine months of when you originally filed your claim with the court, or else the case will be dismissed.

    Don’t forget the debtor may also contact you directly during this period to try to settle the case without a court hearing. You must advise your solicitor if this happens and they will advise on what to do. Generally, it’s best to let your solicitor obtain default judgment first, since this will secure the debt for a period of time and the court may also award you interest and costs.

    Show Me The Money!

    If your solicitor wins the case, whether by default or at a hearing, the court will issue a judgment stating that the debtor must pay you. Normally the debtor will pay you on their own after such a ruling.

    If you are not paid, you will need to begin enforcement proceedings against them. You will have 6-12 years from the judgment (depending on what State or Territory you are in) to begin enforcement proceedings. After the proceedings a judgment will be entered onto the debtor’s credit record that lasts 5 years. Usually this is enough incentive for the debtor to pay.

    If the debtor still does not pay, the court has a number of options to ensure you are paid. These include garnishing the debtor’s wages, ordering the debtor’s assets be sold or even bankruptcy proceedings against the debtor.

    Alternatively, you can now give the matter back to your debt collector and they can negotiate any type of payment option, so long as the debtor agrees. This is generally what happens and the debtor ends up paying instalments.


    I hope this will help you get your money back, hopefully, without you having to proceed with legal action. At least now you will be armed with the right information. Remember to act fast on all debts. Strike while the iron is hot and your chances of success will be much higher.

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    Adam Stewart - Debt Collection Expert
    About the Author

    In 2002, Adam Stewart established Debt Recoveries Australia Pty Ltd, a debt collection agency specialising in the insurance claims industry.

    Adam has worked in the fields of motor vehicle insurance and debt recovery for over 12 years, working with some of the largest insurance and debt recovery companies in Australia. Read more

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