What To Do If You Receive a Demand Letter?

How do you handle a demand letter? It can be frightening but don’t worry, here’s what to know.

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Introduction

In a formal definition, a demand letter is a written document sent from one party to another in an attempt to resolve a dispute. Generally, these letters are demanding payment of some sort to resolve an issue – before legal action commences. In other words, it is a way to settle something before taking it to court and tacking on additional attorney fees, court costs, and so forth.

Some demand letters are sent via regular mail while others are sent via certified mail. If you have ever received one then you know just how nerve-wracking they can be. This is especially true since it is not uncommon for these letters to seek large amounts of money. What do you do if you don’t have this money? What will this mean for your future? Will they file a lawsuit? There are likely so many questions that go through your head once you’ve read through a demand letter.

Know this – if you have received a demand letter, it shows that the party has attempted to resolve the issue before taking it before the court. They are likely serious about pressing forward, as well, if they have hired an attorney to send out the demand letter rather than making claims themselves.

Here’s what you do if you receive a demand letter.

Do Not Ignore the Demand Letter

There is a good chance that you may open your mail, see the demand letter, and then set it aside. After all, if you know you don’t have the money to pay it – then what good will it do you to address it anyway, right? This commonly happens with those who receive letters from creditors. Mounting debt can be overwhelming so you set aside the demand letter because you can’t do anything about it anyway, right?

Never ignore a demand letter. Even if you don’t intend to do what it is asking or have the means to do so. Most demand letters will request an action from you – such as requesting your written response to the demand within a specific amount of time. It will usually state that if you don’t that legal action against you will be considered. Should legal action commence due to your lack of response, they may immediately have the upper hand stating that they made reasonable attempts to resolve outside of court to no avail.

Read the merits of the claim and consider the amount due. At this time, it may be wise to hire an attorney of your own to handle this matter for you.

Address the Validity of the Demand

Do you owe this money? Are you aware of the action that it is referring to? Are the facts in the demand letter accurate? Look at it closely and determine how the facts listed compare to how you see the event. Are there discrepancies? Note down everything. Just be sure to stick to the facts. If you do truly believe that you owe the other party, but you think the amount is different, note that down, too.

All of this information will help you – or your attorney – formulate a response to the demand letter.

Determine the Motive

Nearly all demand letters will threaten a lawsuit. Whether or not they intend to file one, it is enough to get the receiving party to pay attention – and act. Nobody wants to be sued in court. But, are they bluffing? Do they truly intend to file a lawsuit? Or, are they just trying to get some sort of compensation for whatever action happened?

Lawsuits can be costly, both financially and with time. So, not everyone who sends a demand letter intends to go to court. Rather, they just want to be able to receive something. Of course, if their claim is not valid or backed by proof, it could be just a method of bullying you into paying if they think you will want to avoid exposure in court. 

Should You Hire a Lawyer?

If you don’t currently have an attorney, you may want to find one. Having an attorney respond to a demand letter lets the other party know that you are on an even playing field. You don’t even have to hire an attorney to work the case, as all you need right now is a response to the demand letter. Should it go further, then yes – absolutely you will need an attorney. But to simply send out a response to a demand letter may be a simple, one-time cost – though it can make a difference in how the other party will respond.

Think of it this way. If you are an attorney who sends out a demand letter on behalf of a client, then you receive a response from the individual (or no response at all), then you know you have the upper hand. However, if an attorney responds, then you know you need to make sure your claim is valid and that you can prove each one. And, you may likely do what you can to convince your client to settle it outside of court.

This is the difference having a lawyer can make.

Respond to the Demand

As you – or you and your attorney – prepare to respond to the demand letter, you want to make sure it is done within the allotted time. It may be a good idea to send it with tracking so that you have proof it was delivered before the end date. Requiring a signature is also a great idea so you have proof of who received it.

Keep your letter professional and full of facts. Be serious and hold a tone that shows you are, but while you are formal, also be cordial. Don’t give them a response that could be used against you in court. Depending on how well your response is put together, the attorney may look further into the allegations and convince the client to abandon it.

Conclusion

Having a lawyer on your side while handling your demand letter is a great way to protect yourself at all times. After all, you only get one shot at making a first impression with opposing counsel and the judge.