MAKE YOUR FREE Debt Recovery Letter
What we'll cover
What is a Debt Recovery Letter?
A Debt Recovery Letter reminds your client or customer that they owe money to you or your organisation. Debt Recovery Letters should be used whenever your client or customer doesn’t pay an invoice on time. Debt Recovery Letters are the first step in the debt recovery process.
When should I use a Debt Recovery Letter?
Use this Debt Recovery Letter:
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when you want to recover a debt that is owed to you or your organisation
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when an invoice hasn’t been paid and the payment term has ended
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when you want to commence a more formal procedure for the collection of the debt
For more information, read Payment reminders.
Sample Debt Recovery Letter
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Re: Invoice Number(s):
We are writing to you about the fact that there is an outstanding amount of £ in respect of the above invoice. This amount was due for payment on .
Our credit terms stipulate full payment within days and this account is now days overdue.
Please arrange payment of this account today.
Your prompt attention to this matter would be greatly appreciated. If you have any queries regarding this account, please contact us as soon as possible.
If payment has recently been made, please accept our thanks and ignore this reminder.
Yours sincerely,
About Debt Recovery Letters
Learn more about making your Debt Recovery Letter
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How to make a Debt Recovery Letter
Making a Debt Recovery Letter online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all of the details prepared in advance, making your document is a quick and easy process.
To make your Debt Recovery Letter, you will need the following information:
Introductory details
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The debtor’s details (eg legal structure, name and address).
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The creditor’s (ie your) details (eg legal structure, name and address).
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If the creditor is a company, partnership or LLP, who is signing on its behalf?
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Will the Debt Recovery Letter be printed on business paper that includes the creditor's business name and address?
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When will the Debt Recovery Letter be sent?
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To whom is the Debt Recovery Letter addressed?
Debt
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What are the invoice numbers of the invoices that haven’t been paid (in full)?
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How much money does the debtor owe?
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How many days did the creditor have to pay the invoice and when was it due?
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How many days is payment overdue?
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Is there a contract in place with the debtor?
If there is a contract:
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What is the annual contractual interest rate?
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Will contractual interest be claimed on the debt?
If there isn’t a contract and the debtor is a business:
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What is the annual statutory interest rate?
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Will statutory interest be claimed on the debt?
Alternative payment
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Does the creditor offer the option of making an alternative payment arrangement?
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If so, what is their telephone number for arranging alternative payment?
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Common terms in a Debt Recovery Letter
A Debt Recovery Letter is the first payment reminder you send to a debtor when they owe you money. As a result, this Letter covers:
Sender and recipient details
The start of the Debt Recovery Letter provides details of the creditor and debtor, including their name and address.
The body of the Debt Recovery Letter
The body of the Letter sets out details relating to the debt owed by the debtor. This includes:
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the invoice(s) the Debt Recovery Letter relates to
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the amount of money owed
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when payment was due and how many days the payment is now overdue
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if relevant, the amount of interest due on the debt and how much the debtor has to pay in total
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the option for the debtor to request an alternative payment arrangement
The Debt Recovery Letter also includes automatic mathematical calculations to work out the amount of interest due and the total money owed by the debtor.
If you want your Debt Recovery Letter to include further or more detailed provisions, you can edit your document. However, if you do this, you may want a lawyer to review or change the Debt Recovery Letter for you, to make sure it complies with all relevant laws and meets your specific needs. Ask a lawyer for assistance.
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Legal tips for making a Debt Recovery Letter
Consider entering into a repayment agreement
Entering into a repayment agreement with a debtor can help you avoid the hassle and expense of legal action. Repayment agreements set out how a debtor and creditor have agreed the debtor will repay the money they owe. This is typically done over a longer period of time and may only be relevant in certain circumstances (eg when the debtor is able to pay the debt).
Consider using a Letter accepting payments in instalments to accept a debtor’s repayment plan. Use a Promissory note to formalise the repayment plan.
For more information, read Repayment agreements.
Follow up with the correct documents
A Debt Recovery Letter is the first reminder you should send to a debtor asking them to pay money owed. If the debtor does not pay the money owed or otherwise responds unsatisfactorily to your First Recovery Letter, you should follow up with a Second debt recovery letter. This Letter requests that the debtor makes payment and informs them that you will take further action if payment is not made. If, after sending the second letter you do not receive a satisfactory response, you should send a Letter before action. This is the final letter in the debt recovery process and should be sent before you start legal action.
For more information, read Payment reminders and follow our How to recover debt checklist.
Understand when to seek advice from a lawyer
Ask a lawyer for advice:
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on debt recovery procedures
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on debt recovery outside England, Wales and Scotland
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as to whether an insolvency procedure is appropriate
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Debt Recovery Letter FAQs
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What does a Debt Recovery Letter include?
This Debt Recovery Letter template covers:
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your details (ie the creditor’s details)
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your customer’s or client’s details (ie the debtor’s details)
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the date the invoice should have been paid
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whether interest is payable on the money owed (ie the debt)
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an automatic calculation of the amount of interest to be paid in total
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an automatic calculation of the continuing daily amount of interest to be charged as long as the debt remains unpaid
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Why do I need a Debt Recovery Letter?
You need this Letter if you sent an Invoice to your client or customer and they are late with a payment and you want to commence a formal procedure for the collection of debt. This Letter reminds the debtor to pay the money owed and ensures that they know the consequences of not settling the payment. These include late payment interest charges (if the debtor is a business) and/or a threat of legal action.
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When should I send a Debt Recovery Letter?
You should send your First Debt Recovery Letter as soon as payment becomes overdue. Your invoice should set out how many days your client or customer has to pay (typically this is 30 days). If this payment period comes to an end and payment remains outstanding, you should send the Letter. By using a Debt Recovery Letter, you can feel assured that you have formally reminded the debtor to make payment.
For more information, read Payment reminders.
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Can I use this Letter to recover debt from individuals or organisations?
You can use this Debt Recovery Letter to start a debt recovery process for both individuals and organisations, whether in the course of business or not. However, if you don’t have a contract in place the rules for claiming interest are different.
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Can I charge interest on late payments?
If a contract is in place between yourself and the debtor, you should check what it says about interest on late payments. You may be able to claim contractual interest (ie interest at the rate set out in the contract). If you don’t have a contract in place, you can only claim statutory interest and this only applies to business-to-business transactions. Statutory interest is currently 8% plus the Bank of England base rate and is subject to changes.
You cannot claim statutory interest if your customer is a consumer (ie a private individual not acting in the course of business). If this is the case, you can only claim interest if the contract sets a contractual rate (ie a late payment rate specified in the contract).
Whether statutory or contractual interest is applicable to your Debt Recovery Letter, if you decide not to claim interest in your Letter the Letter will state that you reserve the right to (ie are allowed to) do so in future.
For more information, read Calculating interest on commercial debts.
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How much time should you give the debtor to fully repay the outstanding amount?
You should request that your debtor arrange payment as soon as possible or on the same date. This Debt Recovery Letter also allows you to offer the debtor the option to make an alternative payment arrangement. A Letter proposing payment in instalments should be used by the debtor to propose an alternate payment arrangement, while a Letter accepting payments in instalments should be used to accept an alternate arrangement.
For more information, read Repayment agreements.
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