How to Write a Payoff Letter

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Court action is viewed by the legal system as a last resort, and parties are encouraged to attempt to settle their differences outside of court. A payoff demand letter is one of the most common ways to do this. Not only does it give the other party an opportunity to comply, but it also shows the judge that you were reasonable and that you value the court’s time. Fortunately, a demand letter does not have to contain legal language or even be very long, and oftentimes the threat of a lawsuit is enough for the recipient to comply.

Step 1

Describe the situation as you understand it to be. For example, if you paid a contractor to repair a damaged wall and the contractor never performed the repair, this portion of the letter might read: “On February 13, 2011, you agreed to repair the damaged wall in the master bedroom of my home in exchange for $1,000. That same day, I wrote you a check for $1,000. According to my bank records, you cashed that check on February 14, 2011. Two weeks have since passed and you have not repaired the wall.”

Step 2

Tell the recipient what you want and give the recipient a deadline by which to comply. Continuing from the above example, this portion of the letter might read: “Please remit the sum of $1,000 to me within 10 days.”

Step 3

Inform the recipient what you will do if the recipient does not comply with your request. For example: “If you do not comply with my request, I intend to contact an attorney and file a lawsuit for the return of my $1,000.”

Step 4

Mail the letter by United States Postal Service registered mail, return receipt requested. Although registered mail is considerably more expensive than first-class mail, the return receipt can be used in court to show that the recipient did receive your letter.

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