What Is a Letter of Demand? (And Why It's the First Step to Getting Paid)

A letter of demand (also called a demand letter) is a formal written document that tells someone they owe you money and gives them a deadline to pay. It's the official step between "hey, you owe me" and filing a lawsuit.

If someone has been ignoring your calls, dodging your texts, or just hoping you'll forget about the money they owe you, a letter of demand is how you make it clear that you haven't forgotten and you're not going away.

What Does a Letter of Demand Actually Do?

On the surface, it's just a letter. But in practice, it does several things at once:

• It creates a formal record. Once you send a demand letter (especially via certified mail), you have documented proof that you asked for payment. This becomes evidence if you end up in court.
• It signals seriousness. People ignore texts. They don't ignore formal letters with legal language and deadlines. The shift from casual requests to a written demand changes the dynamic completely.
• It gives them a chance to pay without court. Judges actually look for this. They want to know you tried to resolve the situation before filing a case. A demand letter shows you did.
• It often ends the dispute entirely. About 70% of people pay up after receiving a demand letter without the situation ever reaching a courtroom. That's because nobody wants to deal with court if they can avoid it.

When Should You Send a Letter of Demand?

You should send one whenever someone owes you money and informal attempts to collect haven't worked. Common situations include:

• A landlord won't return your security deposit. You moved out, left the place clean, and they're keeping your money or making up damages. A demand letter citing your state's deposit return laws usually gets their attention fast.
• Someone borrowed money and won't pay it back. Friends, family members, exes. It doesn't matter who they are. If they owe you money and won't return it, a formal demand is the appropriate next step.
• A contractor took your money but didn't finish the job. You paid for a kitchen renovation and they disappeared after demo. A demand letter with your contract attached is powerful.
• You're owed unpaid wages. Your employer owes you for hours worked and keeps giving you the runaround. A demand letter often gets that check cut faster than any phone call.
• A business owes you a refund. You returned a product or canceled a service and they won't give your money back.
• Property damage. Someone damaged your car, your property, or your belongings and refuses to pay for repairs.

If the amount is under your state's small claims court limit (usually between $5,000 and $12,500 depending on where you live), a demand letter is almost always the right first move.

What Goes Into a Letter of Demand?

A good demand letter is simple and direct. It doesn't need to sound like it was written by a lawyer. It needs to sound like it was written by someone who knows what they're owed and isn't backing down.

Here's what to include:

• Who you are. Your full name, address, and contact information.
• Who you're writing to. Their full name (or business name) and address.
• What happened. A factual summary of the situation. Dates, amounts, agreements. Just the facts.
• How much they owe you. A specific dollar amount. Break it down if needed.
• When they need to pay. A specific date, usually 10 to 14 days from when they'll receive the letter.
• What happens if they don't. A clear statement that you'll pursue the matter in small claims court if payment isn't received by the deadline.

That's it. You don't need ten pages. One page that covers all of this is more effective than a lengthy document nobody will read.

Letter of Demand vs. Cease and Desist: What's the Difference?

People sometimes confuse these two. They're different tools for different situations.

A letter of demand asks for money. It says: "You owe me $X. Pay by this date or I'll take legal action." It's used when someone owes you a debt.

A cease and desist letter asks someone to stop doing something. It says: "Stop [harassing me / using my trademark / violating my contract] or I'll take legal action." It's about behavior, not money.

Some situations involve both. For example, if a former business partner is using your intellectual property AND owes you money, you might need both letters. But for most everyday disputes, a demand letter is what you want.

Does a Letter of Demand Have to Come From a Lawyer?

No. And this is one of the biggest misconceptions that keeps people from taking action.

You can absolutely write and send a demand letter yourself. There's no law that says it has to come from an attorney. In fact, for small claims court, most judges expect that you're representing yourself. A demand letter written in your own words, with clear facts and a reasonable deadline, is completely valid.

That said, a letter that looks official and arrives via certified mail does carry more psychological weight. It doesn't matter if a lawyer wrote it or not. What matters is that it's clear, factual, delivered with proof, and gives the person a real deadline.

What Happens After You Send It?

One of three things:

They pay. The most common outcome. Most people who owe money aren't criminals. They're just avoiding an uncomfortable situation. A formal letter with a deadline forces them to deal with it. You get your money. Done.

They want to negotiate. They might offer a payment plan or a partial settlement. This is still a win. If the offer is fair, consider taking it. Getting paid now beats going to court for months.

They ignore it. This is when you file in small claims court. Your demand letter becomes your first piece of evidence. It shows the judge you were reasonable, you communicated clearly, and you gave them every opportunity to resolve it. Judges respect that.

How Much Does It Cost to Send One?

If you write it yourself and send it via USPS certified mail, you're looking at about $5 to $10 for postage and the return receipt.

If you use a service, costs vary. Lawyers typically charge $200 to $500 just for a demand letter. Online legal services range from $50 to $150.

PettyLawsuit does it for $29 with certified mail and tracking included. Over 2,500 people have used it, and about 70% of disputes settle without court. The letter goes out the same day, which is useful when you're already tired of waiting.

The Biggest Mistake People Make

It's not sending a bad demand letter. It's not sending one at all.

People talk themselves out of it. They think it won't work. They think it's too aggressive. They think the amount is too small to bother with. And so they do nothing. They vent to friends, complain online, and eventually just absorb the loss.

That's exactly what the person who owes you money is counting on.

A letter of demand takes the power back. It puts your request in writing, sets a deadline, and creates a path to resolution. Whether you write it yourself or use a service, it's the single best first step you can take when someone owes you money and won't pay.

Don't let it slide.