Debt collection letters are used in many industries to make another party aware that a debt is owed that must be paid. Sometimes this is an error, but in other instances, the party who has not paid for something is attempting to avoid having to make payment. This can be an issue for any kind of business as well as for property owners who have renters.

Knowing how to write this kind of notice is important no matter what kind of business you operate or what kind of business relationship you have with the person who owes you money. Effective collection letter templates will make it clear what the expectations are for the debtor to rectify the debt and will make it easy for the debtor to understand what is needed to clear the debt for good.

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Collection Letter Templates

What is the Collection Letter Template Used For?

The debt collection letter template is used to inform a debtor that they owe money to someone. Collection letter templates are created to provide written notice that there is money owed that will be sent to collections. The collection letter process typically offers more than one warning to the debtor in written form, followed by a final collection letter, which is sent out to indicate that the debt will need to be resolved quickly before being sent to collections. The third collection letter template might explain that the debt has less than 30 days before it is sent to a collection agency, for example.

The time frame for debt repayment can vary per industry and per situation. You will need to verify what the debt collection letter template laws are in your state to be sure about the expectations that you can place on debtors. If you are submitting written notice to debtors that is not legal in nature, you cannot take legal action against them for non-payment of a debt. You might also be required to offer solutions like a payment plan to debtors before you can send the debt to be collected by a collection agency.

Knowing the rules of the debt collection process before you send out a debt collection letter is important. If you need to speak with a lawyer or a legal professional about the right way to draft these letters, you should do so. Your debt collection letter template will be used to prevent issues with non-payment, and you will need it to hold up in a court of law.

Collection Letter Samples

How Many Collection Letters Are Sent to Debtors?

When someone owes you a debt, you will typically send out three letters to them asking for them to pay the amount owed. You might include interest in the debt that has not been paid. You will also need to send a final collection letter that indicates that the total amount much be paid before the debt is sent to a third-party collection company.

Not all debt collection processes will require all of these steps, and state laws can vary regarding the notification process and the transfer to a collection agency. You will need to be sure that you are following the letter of the law with regard to the debt collection process. If three letters is the standard in your state, you will need to prepare all of these letters for the debt collection process that your company will follow.

The letters that you will need to draft will include:

  1. The first collection letter which indicates that a payment was missed, the date it is due, and the amount that is due. This letter can also indicate that the person it was sent to can reach out if they have just sent payment and the letter was sent in error. This letter will also offer a payment plan or other payment arrangements to help resolve the debt quickly.
  2. A second collection letter which states that the payment was missed over a month ago and that there will be interest accruing for the missed payments going forward. You can still offer a repayment plan and other payment options to the person who has received this letter.
  3. The third collection letter will indicate when the payment will transfer to collections and what interest has accrued to this point. The total amount of the debt will be indicated, as well as the repayment date that is required.
  4. The final collection letter will notify that the debt will be transferred to a collection agency. There is usually a drop dead date for the payment, which allows the party who owes money to you to pay the amount that is due before the transfer to collections. This letter will indicate clearly that interest and other fees will also be submitted to the collection agency.

Can You Write Your Own Collection Letter Template?

You can write your own debt collection letter template if you wish. There are lots of example debt collection letter templates out there to look at. You will just need to be sure that you are including the right debt collection letter time frame in each of your submitted debt collection letters. Knowing rental regulations for your state, as well as the number of required notices to the debtor, can be key information to have on hand when you are drafting this kind of legal notice.

Your final collection letter might also need to be compliant with laws in your state as you could be limited in the way that you can transfer the collection amount to a third-party debt collector. There are various steps and stages that will need to be correctly followed throughout this process, so you should be sure that all of your written collection letter templates are properly crafted and have the right language included in them.

Debt Collection Letters

What is the Purpose of Submitting Written Notice to Debtors?

There are various reasons that debtors need to be told in writing that they owe a debt.

  1. Debt collection letters let the debtor know that they owe money. When a debtor owes money and has been notified in writing, there is a paper trail that can be used to enact official legal action against them. This is the first step in not only notifying the debtor of the debt but also establishing a paper trail that shows clearly that you sent out the right kind of collections letters to notify the debtor.
  2. Debt collection letter template drafting should also include means for the debtor to establish a payment plan or a repayment process that can help them get out of debt. This information should be offered in each of the letters that you submit, including the final collection letter that is sent out before the debt is transferred to an agency.
  3. The debt collection letter process allows you to establish a legal timeline that can be used if you decide to take the party who owes you money to court. This is a key aspect of the collections process that a lawyer will require you to follow if you want to be able to proceed with legal action.

What Are the Components of a Collection Letter Template?

These are the necessary components of all debt collection letters. The various submitted notices might culminate with a final collection letter, but you will need to include all of the right information in the collection letter templates that you create so that each one offers a guideline to the debtor related to the debt collection process.

Most entities will sent out a first collection letter, a second collection letter, and then a third collection letter, which might also serve as the final collection letter notice. Timelines can vary when the debt is related to rent, but overall, this is the most common practice for submitting notice to those who owe money to someone.

These are the components of correctly drafted collection letter samples:

  • The amount of the debt in specific. You need to be clear about when the debt began to accrue as well.
  • The date that payment must be delivered or a payment plan must be put in place.
  • Instructions about how to pay the debt. This might be through a payment plan, an offer to form a special arrangement for payment, or a set and specific way that the money must be delivered.
  • Instructions to contact you if the money has been sent and was simply not received by the time that the letter was delivered. This can happen often during the first collection letter notification period but is less likely to be the case when the second collection letter or the third collection letter has been sent to the person who owes money.
  • The first collection letter might indicate that the client or debtor is welcome to continue to do business with the company in question, but only if the debt is satisfied by the stated payment date. Later collection efforts might not offer this benefit to the debtor. Once the debt has been passed on to collection agencies, the client will usually be unwelcome to continue a relationship with the business.
  • In later letters, there should be language that offers the debtor the chance to dispute the debt. Such letters will indicate how the dispute can be filed and by when. A collection agency transfer can still happen if the debtor does not reply with a dispute by the end of the payment or response period stated in the letter.

The more clear that you are in the letter template that you draft, the more likely it will be that the debtor will respond to the first letter rather than wait for subsequent letters to be submitted to them. Make sure that you indicate that the debtor can suffer damage to their credit rating, that they might be passed on to a collections agency, or that you might ask them to leave the property by the end of the expected payment period.

Collection Letter Examples

What Kind of Language Should I use in a Collection Letter?

While it might seem like you should be threatening when you draft a collection letter, you cannot use language that comes across in this manner. Strive to remain impartial and be sure that you are clear about your expectations related to the repayment of the debt. There might also be required language that must be present in your debt letter per the law in your state.

If you are not sure if there are legalities that you need to include in your collection letter, you will want to be sure that you speak with a legal expert before you draft your letter. Being sure that you can take legal action or transfer the debt to collection agencies is key. Using the right language is essential so that you can pursue these options with regard to a debt that you are owed.

Larger companies will almost always have a legal expert draft all of their collection letters for them. This prevents issues with incorrect language and timelines, as well as problems with improper notice being delivered to the debtor. This is not always necessary for smaller businesses but you should still be certain that you have included the right language in your letters related to the collections process.

Make sure as well that you do not skip any of the necessary steps to notify someone of a debt. When there is legal action involved in a debt collection matter, you will need to be sure that you did not act outside of the law during the notification process.

Collection Letter Template Samples

Debt Collection Letters Are Commonly Used by Businesses of All Kinds

If you operate any kind of business, it is likely that you will need to send out a collection letter from time to time. These letters indicate to debtors what the required actions will be on their part to allow them to satisfy the debt and continue to do business with your company. You will need to follow all laws and legalities associated with the debt collection process in your state of residence when drafting this kind of letter.

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Tagged:CollectionCollection Letter TemplatesDebtFinanceLetters
TemplateLab October 7th, 2023
Ryan Duffy
Ryan Duffy