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The first step in recovering a debt is a well worded letter of demand. It is helpful to recommend a client issue a demand of their own. This puts the debtor on notice that they are seriously overdue and foreshadows the matter being passed to a solicitor. After the client’s demand a formal letter of demand should come from the solicitor’s office.

Initial letters of demand should be polite so that a commercial relationship can be preserved if the non payment is merely an oversight. The intention is to let the recipient know the matter is now in the hands of a lawyer but says this in a polite way. It also increases the likelihood of payment if the initial demand is polite. Rude and overly threatening demands from the outset may have the effect of inducing a debtor to withhold payment out of spite.

In many cases a letter of demand indicating the matter has been passed to solicitors is sufficient
to induce a client to pay. In other cases more threatening letters are required. If these fail, then obtaining judgment via the court process and enforcement are required.

We have three letters of demand.

Letter of Demand 1

An initial letter of demand that is polite and assumes there may have been an oversight in not paying. Allows 7 days for payment.

Letter of Demand 2

A more threatening letter that mentions legal proceedings and gives 7 days to pay.

Letter of Demand 3

Gives a further 7 days to pay before proceedings are commenced. Outline costs of proceedings and that these may be added to the debt.

Also included FREE


An updated checklist includes points on what to cover before granting credit to determine if the client is creditworthy or if the debt is recoverable. These will assist in advising clients and will serve as a reminder to the practitioner on what to look out for when assessing the credit worthyness of new clients (and reassessing existing clients)


Includes GST



The commentary that follows and the associated precedents do not constitute legal advice and are general in nature. There is no solicitor / client relationship between the recipient of this material and Precedents Online, or the author. Courts and Tribunals continually change their prescribed documents, practice and procedure. You should check with the relevant Court, Tribunal or Authority to determine whether your documentation is current and appropriate for your purpose. Neither Precedents Online, nor the authors are responsible for the outcome of any court proceeding or process in which the precedents you have purchased are used. You should satisfy yourself that you are using the appropriate practice, procedure and documentation or seek the advice of a qualified solicitor or barrister to advise you.

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What are Debt Recovery Letters

Debt recovery letters, also known as collection letters or demand letters, are written communications sent by creditors or collection agencies to debtors to remind them of their outstanding debts and request payment. These letters are part of the debt collection process and serve to notify the debtor of their overdue account, encourage them to settle the debt, and outline the consequences of non-payment.

Types of Debt Recovery Letters

  1. Initial Reminder Letter: This is the first letter sent to the debtor, serving as a gentle reminder that a payment is overdue. It typically includes:
    • A summary of the debt, including the amount owed and the due date.
    • A request for immediate payment or to contact the creditor to discuss payment options.
    • A polite tone to maintain a good relationship.
  2. Second Reminder Letter: If the initial letter is ignored, a second, more assertive reminder is sent. It usually includes:
    • A reference to the initial reminder.
    • A reiteration of the amount owed and the urgency of the payment.
    • A warning about potential late fees or interest charges.
  3. Final Demand Letter: This letter is more serious and indicates that the creditor may take further action if the debt is not paid. It typically includes:
    • A summary of previous communications.
    • A final request for payment within a specified timeframe.
    • A warning of possible legal action or referral to a collection agency.
  4. Letter Before Action (LBA): Also known as a pre-litigation letter, this is a formal notice that legal proceedings will be initiated if the debt is not paid. It includes:
    • A summary of the debt and previous attempts to collect.
    • A clear statement that legal action will be taken if payment is not made by a certain date.
    • Information on the potential legal costs that the debtor may incur.
Key Components to Debt Recovery Letters

Key Components of a Debt Recovery Letter

  1. Creditor Information: Name, address, and contact details of the creditor or collection agency.

  2. Debtor Information: Name and address of the debtor.

  3. Account Details: Information about the debt, including account number, amount owed, and the original due date.

  4. Payment Instructions: Clear instructions on how the debtor can make a payment, including acceptable payment methods and contact information for any questions.

  5. Consequences of Non-Payment: A statement outlining the potential consequences if the debt is not paid, such as late fees, interest charges, legal action, or damage to credit score.

  6. Request for Payment: A polite but firm request for immediate payment or to contact the creditor to arrange a payment plan.

  7. Deadlines: Specific deadlines for payment to avoid further action.

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Established since 2015, Precedents Online leads the industry with a diverse collection of over 300 legal templates. Our legal documents, meticulously crafted by practicing Solicitors and renowned legal authors, provide you with the precise solutions you seek. Step into a world where legal paperwork is made easy .

Eric Kalde is the author of over 300 +  practice guides published through the leading Australian legal publishers Precedents Online.
Lawyers all over Australia rely on Eric Kalde’s precedents and practice guides in their legal practice.
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