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Things you need to know about Demand Letter for Money Owed.

Last updated on 15 November 2023

1. What is a demand letter?

A demand letter is a demand made by the creditor on the debtor to pay all unpaid amounts owed. The creditor gives the debtor a period of time to comply with the demand. The creditor also says that if the debtor fails to comply with the demand within the given period, the creditor is prepared to pursue legal action (e.g. file a case in court).

There are no special requirements for a creditor to send a demand letter but it’s best to use a mode of service where the creditor can trace whether the debtor received the letter or not (e.g. via courier). Further, the creditor should save copies of the letter for himself / herself in case the creditor pursues legal action later on against the debtor.

2. When do you need a demand letter?

You need a demand letter if you want to demand your debtor to pay the money you are owed. The creditor sending a demand letter is usually the first step in the creditor attempting to get the debtor to pay.

A demand letter is useful in the following situations:

  • When a person loaned money and the loan remains unpaid.
  • When a person advanced payment on behalf of another person and is yet to be reimbursed.
  • When a person sold goods, or provided services and is yet to be paid.

A lawyer is not required to sign and send the demand letter. However, a lawyer’s services may be necessary if the debtor fails to comply with the demand and the creditor is forced to take legal action. In these cases, the creditor should get a lawyer’s advice on the next appropriate legal action to take.

3. How can a demand letter protect you?

A demand letter is an easy and cheap way for a creditor to demand the debtor to pay the money owed. Sometimes a demand letter is all that’s required for the creditor and debtor to resolve the dispute and prevent it from becoming a full-blown court case, which can be costly and lengthy.

Further, if the creditor eventually files a case in court, a demand letter shows that the creditor exerted efforts to amicably settle the matter with the debtor.

4. What information do you need to create the demand letter?

To create your demand letter, you’ll need the following minimum information:

  1. The name of the creditor and details (e.g. address, contact details).
  2. The name of the debtor and details (e.g. address).
  3. A brief description of the reason the debtor owes the creditor money.
  4. The total amount the debtor owes the creditor.
  5. The period the creditor gives to the debtor to voluntarily comply with the demand letter before taking legal action.

5. How much is the document?

The document costs PHP 350 for a one-time purchase. Once purchased, you have unlimited use and revisions of this type of document.

You can also avail of Premium subscription at PHP 1,000 and get (a) unlimited use of our growing library of documents (from affidavits to contracts); and (b) unlimited use of our “Ask an Attorney” service, which lets you consult an expert lawyer anytime for any legal concern you have.

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