Bernstein-Burkley, P.C.’s Co-Managing Partner, Kirk B. Burkley, discusses how to draft results-oriented demand letters in this week’s 5 Minute Legal Master Series episode: MAKING DEMANDS.
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Making Demands (5:33)
Welcome to the 5 Minute Legal Master series where expert attorneys help you master important legal topics. Today, board certified creditor’s rights and business bankruptcy attorney, Kirk B. Burkley, discusses making demands.
Today we are going to talking about making demands. We get a lot of calls from clients where the debtor has failed to pay on an invoice, a client has probably made a couple collection calls, sent a couple letters, then they come to the attorneys and they want to elevate the situation a little bit. One of the first things we always hear is if you can just send a quick letter from you the attorney I know they will pay, they just need to hear that we have an attorney involved. While that might be the case sometimes, most often that is not all that is takes. Usually if you have had a customer that has ignored your collection calls there is something else going on, maybe there is a dispute, maybe they simply do not have the money and certainly the new added element of a letter coming from an attorney is helpful and shows that the case has been elevated to the level of an attorney. But it is not the magic bullet in and of itself. We believe that there is an art in even the manner that you make your demand.
So whenever we send a demand letter out from our law firm we usually abide by a few general principles. One, we want to let them know very clearly that in fact we have been engaged. So we want to start out the demand letter by making sure that it is very clear that that account debtor knows that our client has engaged our firm to collect that debt. That does several things, it lets them know very clearly again that it has been elevated to the status of being pursued by an attorney, but also lets that account debtor know that they should be communicating with us. They should be responding to us if they have counsel involved, that counsel should be responding to us, that we are now representing our client in collecting this debt.
Some of the other things that we like to do are point to and attach the relevant documents that establish the debt. I think it is always a mistake when I see a demand letter from an attorney that goes out to someone that has not paid and just says ‘you owe us money please pay.’ It is important to let the account debtor know exactly what the operative documents are, maybe it is an invoice, or a credit application that has the terms to govern or a contract. But whatever it is, including a loan document should always be referenced in the demand letter and point to as much as you can reference the sections and terms and conditions that govern the relationship. If the documents are not too voluminous I recommend attaching them to the demand letter.
You start to run into some problems mainly if you have documents that are simply not practical to attach them all or send them all in the demand letter. In that situation you would certainly want to reference the documents. For example, you might say ‘dear account debtor, this letter is in reference to loan documented dated whatever date, please see section 4 of the default provisions that talk about what happens upon default.’ So if it the documents are too voluminous to attach you should certainly still reference them. We also like to make sure we tell them what the debt is on that date, what exactly is the debt that is owing as of the date of the letter. So as of today, January 1st 2014, the debt you owe my client is $850,000. You should also then very clearly spell out if in fact there are other interests, penalties, attorneys’ fees, anything else that might be due in owing and break that up the best that you can. For example, if you have interest that is accruing, you should break that out and be very clear on what the per diem is so that account debtor knows that every day that goes on, the debt that was referenced is in fact increasing.
They should also know that attorneys’ fees are going to be included in debt, if you are allowed to collect attorneys’ fee what penalties are being incurred. You do not want any surprises. You should then also let the account debtor know where they are to be sending payment, you do not want any confusion. Is it to send payment to a processing centre, is it now to be sent to the attorney? You want to keep the letter as short as possible. I recommend demand letters should be no more than 3 pages and try and keep them shorter than that if possible. The more clear and concise you can be, the better and you will increase your ability to collect.
This has been another installment of the 5 minute Legal Master series where expert attorneys help you master important legal topics. For more information on this and other topics please visit 5minutelegalmaster.com