Have You Received a Demand Letter? Here’s What to Do Next

A demand letter is a common tool used by individuals and companies to encourage another party to take a specific action. Usually, this is for the purpose of obtaining a payment, but it can be used for other things as well. This type of letter may come from a person or company, but more often it will come from a law firm or legal service on their behalf. While these letters often have the appearance of a legal document, they don’t actually represent formal legal action at this point. Demand letters are actually an attempt to avoid the expense of a lawsuit by seeking a desired result without having to resort to the court system. With this understanding, it is important to know how to respond to these letters to get the results that are right for you.

Determine the Validity of the Letter

First, determine whether the action that is being demanded of you is valid. If a company is insisting that you make a payment, but the debt is either invalid or has already been repaid, you should not send in any money. Even if you do owe the company money, check to make sure the amount that they are demanding is in fact the amount you still owe.

Decide What Action to Take

If you find that the demand is valid, and you have the ability to comply, you will need to decide what actions to take. In many situations, demand letters are sent only after other communication attempts have failed. This may mean that the debt or obligation has been sold to a third-party debt collector or other entity. If this is the case, you may be able to settle the obligation for a fraction of what they are demanding. You do have a number of options available to you, including:

  • Comply with the Demand – If the letter is a demand for payment, you can repay the full amount owed. If you choose to do this, make sure you get a written receipt that shows the payment has been made in full.
  • Settle the Obligation – Try to settle the obligation for less than the full amount owed. If the other party agrees, you need to get a written letter saying that they will accept a specific amount as a full settlement of the obligation. Don’t make any payment until you have that letter, and then make sure to get a receipt once you do make your payment.
  • Delay the Obligation – If you are unable to comply or settle the obligation, you can try to delay collection. Letting the company know that you don’t have the ability to comply now but will at some point in the future can be effective.

Talk with an Attorney

While the demand letter is not a legal action in the traditional sense, it may lead to legal action if not handled properly. To steer clear of any potential pitfalls, it’s a good idea to have an attorney review the letter and advise you on what to do. IGC can help, so contact us to discuss your situation and find out what next steps you should take.

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.