Guides / What is a letter of demand?
What is a letter of demand?
A letter of demand is a formal written request to pay money that is owed. It says how much is owed and why, sets a deadline, and tells the other side what will happen if they do not pay. This guide explains what the letter can and cannot do, and when it is worth sending.
The meaning of a letter of demand
A letter of demand is the final request for payment before legal action. It goes from the person or business owed the money (the creditor) to the person or business that owes it (the debtor).
A well-prepared letter of demand:
- names the right parties, using their correct legal names;
- states the amount owed and shows how it is worked out;
- explains where the debt comes from, such as a contract, an invoice or a loan;
- gives a clear date by which payment must be made;
- says what the creditor will do if the money is not paid by then.
Most are sent by email and by post. The letter also becomes part of the record if the matter later goes to court.
The numbers to know
14 days
We usually allow 14 days. If your contract sets a different period after notice, we use that.
Common questions
21 days
The company then has 21 days to pay or apply to have the demand set aside.
What a letter of demand is not
$4,000
A creditor’s statutory demand is a different document. It is served on a company, must be in the prescribed form and must be for at least $4,000.
What a letter of demand is not
6 years
In Victoria, a claim for a contract debt generally has to be started within six years of when the right to sue arose.
What a letter of demand is not
$100,000
You can file a claim in the Magistrates’ Court of Victoria, which hears civil claims up to $100,000.
What happens after it is sent
What a letter of demand is not
It is not a court order. A letter of demand has no legal force of its own. The obligation to pay comes from the contract or arrangement behind the debt, not from the letter. Nothing happens automatically when the deadline passes. The creditor has to decide what to do next.
It is not a statutory demand. A creditor’s statutory demand is a different document. It is served on a company, must be in the prescribed form and must be for at least $4,000. Unless it is based on a court judgment, it must come with an affidavit verifying the debt. The company then has 21 days to pay or apply to have the demand set aside. See Statutory demands.
It does not stop the clock. In Victoria, a claim for a contract debt generally has to be started within six years of when the right to sue arose. Sending a letter of demand does not pause or extend that time. A part payment, or a written acknowledgment of the debt signed by the debtor, does restart it.
When to send one
A letter of demand makes sense when:
- the payment date has passed and reminders have not worked;
- the debtor keeps promising to pay and does not;
- the debtor has stopped answering calls and emails;
- you are prepared to take a further step if the deadline passes.
Before it goes out, gather the quote or contract, the invoices and the messages about the work or the debt. If the debtor has raised a real complaint, deal with it first or answer it in the letter. A demand that ignores a known complaint tends to start an argument.
Who sends a letter of demand
You can write and send your own. Many businesses do, and our guide on how to write a letter of demand includes an annotated example.
A letter from a law practice usually carries more weight. It is checked before it is sent, and it comes from someone able to take the next step. If you write your own, do not make it look as if it came from a lawyer, a court or a government body. Victorian law treats that as a prohibited debt collection practice for anyone collecting a debt in trade or commerce.
What happens after it is sent
There are four common outcomes.
- They pay. The matter ends there.
- They offer to pay over time. Get the arrangement in writing and signed. A signed acknowledgment of the debt also restarts the six-year period.
- They dispute the debt. Their reasons tell you a lot about how a court would see the claim. We read the reply and give you our view.
- They ignore it. You can file a claim in the Magistrates’ Court of Victoria, which hears civil claims up to $100,000. If the debtor is a company and there is no genuine dispute about the debt, a statutory demand may be an option. See If they still do not pay.
Common questions
Have another question? Phone 1800 776 529 or send us a message.
No. It is a formal request, not an order. Whether the money is owed depends on the agreement and the facts. The letter matters because it sets out the claim clearly and shows you gave the debtor a fair chance to pay.
It is the usual first step, and it is nearly always worth taking. Many debts are paid once a firm deadline arrives, and the letter is a clear record that you asked before you sued.
We usually allow 14 days. If your contract sets a different period after notice, we use that.
Start with the deadline. Then read it closely and test the amount claimed against your own records. See Received a letter of demand?
Law referred to
- Corporations Act 2001 (Cth) ss 9, 459E, 459G, 459H.
- Corporations Regulations 2001 (Cth) reg 5.4.01AAA.
- Limitation of Actions Act 1958 (Vic) ss 5(1)(a), 24(3), 25.
- Australian Consumer Law and Fair Trading Act 2012 (Vic) s 45.
- Australian Competition and Consumer Commission and Australian Securities and Investments Commission, Debt Collection Guideline: For Collectors and Creditors (Regulatory Guide 96, April 2021).
- Magistrates’ Court Act 1989 (Vic) ss 3(1) (definition of “jurisdictional limit”), 100(1).
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about the law in Victoria as at October 2026. It is not legal advice about your circumstances.
Someone owes you money and reminders have not worked?
We can send a letter of demand on our letterhead for a fixed fee of $440 including GST. We read your documents, check the debtor’s correct legal name, and email and post it no later than two business days after we have everything.
Phone: 1800 776 529
Email: info@lettersofdemand.com.au
Hours: Monday to Friday, 9 am to 5:30 pm
Office: 435 Nepean Highway, Frankston VIC 3199. We act across Victoria by phone, email and online.
Letters of Demand is a service of Professional Edge Lawyers.