Demand Letter for Money Owed: How to Get Your Money Back

Someone owes you money and won't pay. You've asked nicely. You've sent reminders. Maybe you've even gotten angry. None of it worked.

A demand letter is your next step, and often the most effective one. It's the formal, documented way of saying "pay me what you owe, or I'll take legal action." And it works more often than you'd think.

Types of Money Owed (and Why It Matters)

The type of debt affects what laws apply, what penalties are available, and how you frame your demand. Here are the most common scenarios:

Personal Loans

You lent money to a friend, family member, or acquaintance, and they haven't paid it back. This is the most common situation and can be the trickiest because of the personal relationship.

• With a written agreement: Your case is straightforward. Reference the agreement, the amount, and the payment terms.
• Without a written agreement: Still enforceable if you have evidence of the loan (bank transfers, text messages, witnesses).

Unpaid Invoices (Business)

A client or customer received your goods or services and hasn't paid. This is governed by your contract terms and commercial law.

• Reference the specific invoice numbers and dates
• Cite your payment terms (Net 30, etc.)
• Include late payment penalties if specified in your contract

Security Deposits

Your landlord is holding your security deposit after you've moved out. This is one of the most successful types of demand letters because most states have clear laws with penalty provisions.

Unpaid Wages

Your employer owes you for hours worked, overtime, commissions, or final paychecks. Federal (FLSA) and state labor laws provide strong protections here.

Insurance Payouts

An insurance company owes you for a covered claim and is dragging its feet or denying payment.

Contractor/Service Provider Refunds

You paid for work that wasn't completed, or was done poorly, and the contractor won't make it right.

What Your Demand Letter Must Include

An effective demand letter for money owed has six essential elements:

1. The Exact Amount Owed

Be specific. Don't say "the money you owe me." Say "$3,247.50, consisting of $3,000 principal plus $247.50 in accrued interest at 5% per annum as agreed."

2. The Basis for the Debt

Why do they owe you? Reference the specific:

• Contract, agreement, or invoice
• Date the obligation arose
• Terms that were agreed to
• What you provided (goods, services, money)

3. History of the Dispute

Show that you've been reasonable:

• When the payment was originally due
• Your prior attempts to collect (dates, methods)
• Any excuses or promises they made
• How long the debt has been outstanding

4. Relevant Laws

Citing the applicable law shows you know your rights and makes the letter more intimidating:

• Breach of contract (cite your state's code)
• Unjust enrichment
• State-specific consumer protection laws
• Late payment penalty statutes (some states provide automatic penalties or interest on certain debts)

5. A Firm Deadline

"I demand payment of $3,247.50 within 14 days of your receipt of this letter." Fourteen days is standard for money owed. More on choosing the right deadline.

6. Consequences of Non-Payment

State what you'll do if they don't pay. Be honest and specific:

• File in small claims court
• Seek court costs and interest in addition to the principal
• Report to credit bureaus (for business debts)
• Hire a collection agency

Sample Demand Letter Language

Documentation You Need

Before sending your letter, gather everything that proves the debt:

Strong Evidence:

• Signed contract or loan agreement
• Invoices with payment terms
• Bank records showing the transfer
• Canceled checks
• Email or text confirmations of the debt/agreement
• Written promises to pay

Supporting Evidence:

• Text messages or emails discussing the debt
• Voicemails acknowledging they owe you
• Witness statements
• Photos of work not completed (contractor disputes)
• Prior payment history (showing a pattern)

State-Specific Tips

Interest and Penalties

Most states allow you to collect interest on unpaid debts, even if your agreement didn't specify an interest rate:

• New York: 9% statutory interest rate
• California: 10% (with written agreement) or 7% (without)
• Texas: 6% (no agreement) or up to 18% (with agreement)
• Florida: Varies, check Section 55.03 Florida Statutes

Check our state-specific guides for your state's statutory interest rate.

Small Claims Court Limits

Know your state's limit before threatening to file:

• California: $10,000 (individuals) / $5,000 (businesses)
• New York: $10,000
• Texas: $20,000
• Florida: $8,000

If your claim exceeds the small claims limit, you may need to file in regular civil court (more complex and potentially requiring an attorney).

What to Do After Sending

1. Track delivery: Your certified mail tracking will confirm when they received it.
2. Mark your deadline: Put the response date on your calendar.
3. Prepare for court: While waiting, research the small claims filing process in your county so you're ready to act.
4. Document everything: If they call or text you, keep records of all communication.
5. Follow through: If the deadline passes with no payment, follow through on your stated consequences.

Key Takeaways

• Be specific about the exact amount owed and how you calculated it
• Cite the basis for the debt (contract, agreement, invoice) with dates
• Reference applicable state laws and potential penalties
• 14 days is the standard deadline for money owed demands
• You don't need a written agreement to pursue a debt - bank records and texts count
• Know your state's small claims limit and statute of limitations

Related Articles

• Can You Send a Demand Letter Without a Lawyer?
• How Much Does a Demand Letter Cost?
• Small Claims Court Demand Letter Guide
• What Happens After You Send a Demand Letter?