As an initial step in the collection of a consumer debt, counsel should contact the debtor directly to request payment of the debt. In general, you should send a letter to the debtor by certified mail with a return receipt requested, stating (at least) the following information:
- Who you represent;
- The underlying basis for the claimed debt (e.g., a contract or unsecured promissory note);
- The exact amount of the claim;
- A date certain by which payment to you must be received or else formal litigation will be commenced; and
- The form by which payment is to be made to you for the benefit of your client.
This demand letter should be accompanied by (1) a copy of a written statement signed by your client that authorizes you to act on your client’s behalf and (2) a copy of the contract or other document, if any, on which the debt claim is based.
When you make contact with a debtor, be sure to observe applicable provisions of California and federal law regulating debt collection efforts.
If the debtor responds at all to your demand letter, the type of response usually ranges from denying liability for the debt to requesting more time to make payment or asserting that the debt has already been fully paid.
Depending on the type of response, you may be able to avoid filing suit to collect the debt by entering into a payment plan with the debtor or other settlement of the debt. Carefully consider these options when assessing the case.
But if it’s clear from the debtor’s response that some form of settlement isn’t going to work and that the potential benefit to your client of litigating the matter justifies the cost of litigation, filing a civil complaint may be your best option.
For more on California and federal law regulating debt collection efforts and filing a civil complaint to collect a debt, turn to CEB’s Debt Collection Practice in California. Also check out CEB’s California Basic Practice Handbook, chapter 16 and CEB’s program Creditors’ Remedies and Debtors’ Rights, available On Demand.
Related CEBblog™ posts:
- What to Check Before You Collect
- What Is a Debtor to Do When Judgment Day Comes?
- Debt Collectors Gone Wild
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