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How to Get your Debtor to Pay

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Last revision: April 23rd, 2019
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Category: General Business Documents

Having a debtor that refuses to pay isn't just a headache: it can be a major financial loss, especially for a creditor with multiple loans out. Being a "creditor" doesn't have to mean that you are a big business that's constantly giving out money, it can be as simple as being the type of person who loans friends and family money for items that they may need. In other words, your intentions could be great when you first decide to loan out funds, but then, over time, having to chase your debtors to collect the money back could really change your view on whether you wish to help people out in the future.

As a creditor, you could also be a business providing a good or service - for example, you could be providing freelance services to clients who said that they would pay you later. If they didn't, and you are having to go after them, this makes them just like any other debtor that didn't pay - and unfortunately, makes it much more difficult for you to obtain the money that is owed to you.

Although having to chase people down for payment is never ideal, in this guide we'll breakdown the steps you can take to get your debtor to pay up. Here, we'll walk through the best things you can do to try to receive payment before needing to take it to court. Sometimes, unfortunately, these things end up in lawsuits, but there are many ways to try to obtain your fund before that happens.

Important Definitions

As mentioned above, keep in mind here that a "creditor" is just any person or business that is owed money. A creditor does not have to be the traditional type of creditor that many people think of, like a bank or a credit card company. It can be just an entity that is owed funds, even just a small amount of funds, from any other person or business.

Similarly, a "debtor" doesn't have to be someone that is drowning in credit card debt or bank debt. A debtor is simply a person or business that borrowed money - a debtor can even be a debtor to their own parents! - and didn't pay it back.

Often times, the parties will use a Loan Agreement to outline the terms of their relationship. Ideally, this document would say what should happen in case the debtor defaults, but it does not always. And of course, sometimes the parties do not use a Loan Contract at all, and instead have only a verbal relationship, which makes getting paid back much more difficult.

Keep in mind that this article is meant to guide you, but does not constitute legal advice. For any questions you may have about getting your debt repaid, contact an attorney licensed in your state to help you.

Without further ado, here are the steps you can take in order to get your debtor to pay up.


1. Discuss things (pleasantly) with your debtor.

The first step in any situation where you are owed money is to just sit down and have a frank conversation with your debtor. Perhaps it's already been months that the debtor has been overdue on their payment and hasn't gotten back to you - let that go for this first serious conversation.

Sit down and discuss your concerns, letting the debtor know that you are happy to have helped them out with a loan, but that you need to have the money repaid now. If you'd like, and if the debtor seems receptive, you might want to consider working on a payment plan in this first conversation, making the debtor feel like it's okay if they don't have all the money right now. That part is entirely up to you though, and you may wish to just ask for the full payment back.

You may feel like a simple conversation might be useless, but unfortunately, the old adage about catching more flies with honey than vinegar is really true here. Although you may feel like the debtor won't hear your concerns, chances are high that they'll at least be more receptive if they are first approached pleasantly (even if they really shouldn't get the benefit of the doubt).

The debtor might just make up an excuse about forgetting the debt or maybe not realizing they were past due - this is because much of the time, people or entities that are in debt hope that their creditors will just let the debt go. Once your debtor realizes this isn't the case, they may be much more likely to simply pay up and have the debt removed from their worries.

Hopefully, your debt repayment will be worked out easily in this conversation. If not, though, there are additional steps you can take.

Final takeaway: set up a time to have a pleasant, but firm, initial conversation with your debtor about their defaulted loan.


2. Go over your agreement, if you have one.

Before we move on to sending any kind of written notice, it's important that you take the time to go over the written agreement you have with the debtor. That allows you to make sure that the debt has been defaulted on and also forces you to double check whether you are required to take any steps before instituting legal action under the terms of the agreement.

If you simply loaned a party money, and that was the entire basis of the relationship, you may have had a Loan Agreement or Promissory Note. Most often, these detail exactly what should happen in cases of default, giving you some guidance on what to do next.

However, if the debt is owed as a result of another relationship - such as services or goods that weren't paid up - you'll have to go over that agreement in full to see if it says anything specific on repayment of debt. Service Agreements cover a broad range of service providers who act as independent contractors with their clients. For goods, a Sale of Goods Agreement may have been used. If the agreement is very detailed or complicated, you may wish to have an attorney's help.

Once you have a good handle on what the written agreement allows or requires you to do, you can move on to continue the conversation with the debtor, perhaps now through slightly more forceful means.

Final takeaway: review your agreement in detail, hiring an attorney to help you understand it if needed.


3. Send a gentle written reminder.

If your debtor has still decided not to pay after the initial talk, it's time to send a written reminder. Here, ideally, you should still try to keep the note gentle, as this will be used as evidence of your attempts to get the debt repaid in case you need to take the case to the legal system.

In this first written reminder, simply state all of the details of the debt: such as when it was loaned out, what the circumstances where, how much the loan amount was, whether it has accrued interest, and when it was expected to be paid back. Then finish the letter up by requesting payment by a certain date, but keep it polite and pleasant.

Many debtors will simply remit payment once they receive a written note to do so.

If your debtor still hasn't paid you by the first deadline requested in your letter, it's time to move on to additional steps.

Final takeaway: Send a gentle written communication first, to see if the debtor responds.


4. If you'd like, send a follow-up.

This step is optional, but if you'd like, you can send a follow-up to the written reminder. The primary reason to send a follow-up is because if you have to take a debtor to court, you'll want as much written evidence of your attempts to collect payment as possible.

Often, in the business world, written follow-ups are sent for all different kinds of communications, which is why it might be a good idea here.

If you do send a follow-up, make sure it restates all of the details of the initial letter: date of the loan, circumstances, the amount, interest, and initial repayment date. Here, also include the deadline date you gave in the first letter and ideally, attach that first letter to the back of this one.

That way, the debtor won't be able to say they forgot or never received details on repayment. You've begun to create a clear record of communication.

Final takeaway: if you would like to, send a follow-up to your original correspondence restating all of the details.


5. Send a written demand for payment (with a firm deadline).

Unfortunately, if none of your polite attempts at getting the money have worked, it's time to resort to more forceful tactics. The next step is to send a final written communication, but this time make it clear the communication is a demand for payment, rather than a pleasant request.

There are many different forms you can use for this forceful demand, such as a Monetary Demand Letter or a Notice of Funds Due. The latter would be used in the case of a client that hadn't paid, the former can be used for any situation in which money is owed to you.

This written demand should make clear that you are considering resorting to legal action, since the debt has not been paid back even after several attempts at collection. This demand letter should restate everything from the previous letters: all the details on the loan and the multiple deadlines you have given. Ideally, consider attaching all previous letters.

The most important piece of this is that the letter should wrap up letting the debtor know that if payment is not received, the next step will be more serious legal action.

Final takeaway: send a forceful demand letter to the debtor, making clear that you plan to take serious legal action if the money is not paid back.


6. Consider a debt collection agency.

This is a step that many people won't consider because it can be, in some ways, more complicated and time-consuming than taking a debtor to court. You may wish to hire a debt collection agency to go after the debt for you. These agencies are professional collectors and usually they charge a percentage of the debt owed to get it back for you.

A debt collection agency may not be the right choice if the debt is relatively small and a percentage out of that debt would make not worth it.

However, since these agencies are professionals, many times they can get the debt back more efficiently than you could, on your own, so it might be worth considering if you would really like to avoid any kind of legal action.

Final takeaway: for debts that are medium-to-large, a debt collection agency might be beneficial before going to court.


Unfortunately, if all other resolution attempts have failed, it might be time to consider filing a case. What type of case and in what court depends on what the debt stemmed from or whether there was an additional underlying agreement in place.

Litigation is often a long process and can be expensive, as well. Sometimes, however, just the filing of a case against them pushes debtors into repaying the loan amount and settling the case. The reason for that is because litigation will be long and expensive for the debtor to defend, as well.

Hopefully, you won't have to take the case all the way, but you should be prepared to do so, just in case. You'll want to hire an attorney licensed in your state who specializes in financial matters like these.

The best case scenario is that the impending litigation makes the debtor realize they should just pay up. The worst case scenario is that you go to court and lose, but either way, if the debtor hasn't paid up, there may be no options remaining.

Final takeaway: if the debtor hasn't responded to any other repayment attempts, it may be time to file suit in court.


Unfortunately, trying to get a debtor to pay up on past due funds can be a very long process. It's important to remember, however, that as long as you've got a solid written agreement, it's likely that if you persist, you'll be able to recover your funds. Often, even if a written agreement wasn't in place at the start of the relationship, some recovery is possible.

Always remember to touch base with an attorney in your state for any complex legal needs.


About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.


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