How to Write Debt Collection Letters to Legal Clients

Have you encountered a client who failed to pay you for your services within the agreed time? How many times did you have to remind clients to pay what they owe you in your career as a lawyer?

The solution to your problem could be a lawyer debt collection letter.

Clio’s 2021 Legal Trends Report indicates that lawyers don’t get paid for 12% of the hours they bill to their clients. That practically means that lawyers work at least two days a month for free, and probably even more, given the long hours they usually pull.

So why would you want to go unpaid for the work you do? It’s probably not easy to ask your clients for payment, especially if you have just started your solo practice and don’t want to risk losing clients. But the fact is—you need paying clients to keep your firm in business.

On the other hand, your concerns may lay elsewhere if they are your long-term clients. You want to maintain a good relationship with them and have them stay with your firm. Good relationships still mean a great deal in your profession, and you want to keep that level of trust and respect with your long-term clients.

A lawyer debt collection letter could be a great tool to help you collect on those unpaid hours and still keep your clients. Let’s see how those letters work.

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What Is a Debt Collection Letter?

A debt collection letter, or a demand letter, is a formal notice you send to a client who has failed to pay their bill in due time. If you tried to remind your client via phone or email that they had a pending bill with your firm, and they still didn’t pay after that, you should consider sending a formal reminder.

It sometimes happens that your client is simply busy, or maybe out of the country, and therefore was unable to answer your calls or make the payment. You should give them that benefit of the doubt and make your first debt collection letter a friendly reminder that they have an outstanding debt towards your firm.

It can also happen that your client is in financial trouble and they were not able to pay their debt to you. That’s also one of the situations where a debt collection letter could come in handy.

What Is the Purpose of a Lawyer Debt Collection Letter?

As the name itself indicates, the purpose of the debt collection letter is to ultimately collect what you are owed from your clients. However, that’s not the sole purpose of writing this letter because you might not know the circumstances surrounding the still pending debt.

Before sending this letter, you need to consider whether you’ve done everything to remind your clients they haven’t paid their bills and if you have made the payment process easier for them. Some people prefer to pay their bills online and use their credit cards, and others like different payment methods better.

Doing your best to accommodate your clients’ preferences could help increase payment efficiency and help you charge for all the hours you put in working on a case. You should also ensure that you keep good track of your hours and bill your clients fairly.

If you do all that and you still have some outstanding invoices you couldn’t collect, here’s what debt collecting letters can help you do:

Remind your clients they haven’t paid their bills. If you want your first letter to be a friendly reminder that a client has an outstanding invoice they haven’t taken care of, your letter should use the appropriate tone. Kindly ask the client to settle their debt and mention when the due date was for the payment they missed. Sometimes all your client needs is a reminder that they have missed a payment.
Initiate negotiations and establish a payment plan. You may not have been aware that your client was struggling with the cash flow, and they could have been reluctant to inform you. If they tell you that when replying to your first debt collection letter, your following letter could be a proposal on how they can pay in installments or offer a different payment plan that would be rational and beneficial for both parties.
Inform the client about initiating legal proceedings. If the client refuses to pay what they owe after two or more letters, you can decide to pursue legal actions. Your following correspondence can inform the client of the steps you are going to take to retrieve the debt. The debt collection letters you’ve previously sent may serve as evidence that you informed the client about the debt and offered payment solutions. Consider if you would want to file a lawsuit against the client, hire a collection agency, or seek arbitration.

Depending on how this process ends, you can decide if you want to keep working with the client or have them look for another lawyer to cater to their legal needs. If the debt collecting process ends amicably and without legal actions, your letter was a success, and there is no reason to end your relationship with the said client.

Lawyer Debt Collection Letter: How to Write One?

Before discussing the elements of a lawyer debt collection letter, let’s first look into some ground rules and best practices when writing your letter.

As a lawyer, you know to obey legal regulations when starting any formal process. The Fair Debt Collection Practices Act sets general guidelines for creating a debt collection letter and protects the debtors from harassment and any abusive practices. Ensuring that you follow the Act will remove any legal obstacles to the debt collection process.

Remembering that the debtor is your client who you’d like to continue working with in the future can put things in the proper perspective. You should be direct in your letter and state its purpose clearly, but don’t be aggressive or use hostile language. Try to explain everything in simple terms as your client might not understand the complicated legal terminology.

Another thing to remember is to remain professional, just like you had been when working with the client. It never hurts to be friendly and polite, and it can help the debtor feel more comfortable and less threatened by your letter.

Also, if you’ve written this kind of letter before and keep a template somewhere on your computer, feel free to use it again. However, personalize your letter just enough so it doesn’t feel like a generic template you use all the time but that you took some time to speak to the client directly.

Last but not least, make copies of the letters you send and receive to ensure the entire debt collecting process is well-documented. It will help you with similar future actions, and it will also provide you with evidence that you tried collecting the debt before being forced to initiate legal proceedings if it comes to that.

What to Include in a Lawyer Debt Collection Letter

There are certain elements that every lawyer debt collection letter should have, no matter who writes it and to whom. The body of the letter should be personalized, as we already mentioned, but it shouldn’t miss its purpose.

Here’s what every debt letter should include:

Date of the letter
Lawyer’s name, firm, and address
Client’s name and address
A subject line that states its purpose
The precise amount the client owed your firm and the date when the payment was due
Instructions on how to pay the debt and the new deadline
A polite ask that the client gets back to you, especially if they need a payment plan or think you made an accounting mistake.

Depending on the client’s reply, your following letter should include the payment plan or another polite reminder of what you are trying to bill them. It wouldn’t hurt if you would also:

Reassure the debtor that you would like to keep them as a client and therefore require a timely payment for your services
Leave room for the possibility that the client paid their bill, and you failed to track the payment

In the later stages of the debt collection process, if the client’s reply wasn’t favorable or you haven’t received a reply at all, you should state your next course of action. Before taking the efforts to collect the debt to the next level, warn the client about the impending legal proceedings and give them one more chance to make the payment.

Your final email should list what actions you are taking to collect the debt and remind the client they still have the right to dispute it in due time. Remember to stay polite and direct, and list all available options that both you and your client have at your disposal.

If it eventually comes to that, inform your client whether you will file a lawsuit against them or hire a debt collection agency to collect the debt on your behalf.

The Takeaway

The whole debt collecting process can be pretty frustrating, and it probably won’t always end the way you’d want it to end. Your client could think that you are wrong for trying to charge them or that your services were not of satisfying quality and refuse to pay, or even sue you for professional negligence.

Even if they are wrong and don’t have the grounds for a lawsuit, you would still have to defend the claim. Being a lawyer, you know how costly and exhausting these claims can be, and you should get all the help you can to deal with them.

That’s why it is crucial that every lawyer carries legal professional liability insurance, the policy that would help you defend negligence or malpractice claims, among others. You are perfectly aware that you can never be too cautious when it comes to defending a lawsuit, and every investment in protecting your firm is a wise investment.

If you still haven’t purchased your legal malpractice insurance policy, you can start by signing up to Embroker’s digital platform and getting your online quote.