In commercial transactions, when a partner delays payment, evades obligations, or intentionally prolongs debt repayment, it can cause serious cash flow disruption, damage reputation, and affect enterprises operations. To protect their lawful rights, many enterprises choose to send a debt collection letter as a formal warning before initiating legal proceedings or requesting intervention from competent authorities. However, if the drafted content is inappropriate, the enterprise may face various legal risks. Therefore, before sending such a letter, enterprises must prepare carefully to ensure that the document has legal validity, reflects good faith, and forms a solid basis for effective debt recovery. This article presents a Checklist Of 7 Essential Steps For Enterprises Before Sending A Debt Collection Letter, helping to avoid mistakes and optimise debt recovery results..
Understanding the “Debt Collection Letter” Correctly
A debt collection letter is a document issued by an enterprise to its partner, requesting payment of an outstanding debt in accordance with the contract, agreement, or civil obligation. It is a common measure taken before initiating legal proceedings or requesting settlement through commercial arbitration.
A debt collection letter is a legally significant document that expresses the enterprise’s formal demand for payment. It can serve as evidence of the enterprise’s good faith in negotiation and as proof that the other party has breached its obligations. In other words, a debt collection letter is an important legal instrument that helps the enterprise protect its rights and interests while providing a basis for negotiation if both parties wish to maintain their business relationship.
Checklist: 7 Steps Enterprises Should Take Before Sending A Debt Collection Letter
Review the contract and related documents
Before Sending A Debt Collection Letter, Enterprises Should carefully review the contract and all supporting documents proving the debt. The objective is to ensure that the payment claim is legally grounded and factually accurate.
Payment terms: Confirm payment deadlines, methods, and any conditions for suspension or instalment payments (if any).
Ancillary clauses: Check penalty, compensation, and dispute resolution provisions (if any) to accurately reference them in the letter.
Document reconciliation: Compare data across the contract, invoices, delivery notes, and warehouse releases to ensure no discrepancies in amounts or quantities.
A common mistake is sending a debt collection letter without sufficient supporting evidence. In such cases, the letter not only loses its legal value but also weakens the sender’s position in any potential dispute. Therefore, the demand should only be issued when the documents, evidence, and underlying facts are complete, consistent, and legally sound.
Verify the debtor’s legal status and financial capacity
Before sending the letter, the creditor must confirm the debtor’s correct legal identity and ability to perform payment obligations. In practice, many enterprises have faced difficulties when their partner changed address, representative, or entered dissolution or bankruptcy proceedings – rendering the letter invalid or undeliverable. Therefore, Before Sending A Debt Collection Letter, Enterprises Should:
Search the National Enterprises Registration Portal: Verify the debtor’s legal name, tax code, address, and legal representative to ensure accuracy.
Check operational status: Determine whether the entity is still active, suspended, dissolved, or under bankruptcy proceedings.
Obtain basic financial information: If possible, review public financial reports, credit ratings, or market data to assess solvency.
This verification helps identify the correct recipient, choose the appropriate delivery method, and evaluate the debtor’s actual repayment capacity.
Accurately calculate the debt amount and late payment interest (if applicable)
After reconciling records, the enterprise must clearly determine the total amount owed to present a precise and credible demand. This should be done through the following steps:
Separate each component of the debt: Distinguish between the principal, interest, and any incidental charges. This helps define the exact scope of the payment request.
Apply the appropriate interest rate: If the contract specifies a late-payment interest rate, follow that provision. If not, calculate according to applicable law to avoid claims of overcharging.
Prepare a detailed statement of account: To make the debt collection letter clear and verifiable, the enterprise should attach a debt summary table showing information such as the due date, principal amount, interest rate, and the total amount calculated as of the date of the letter.
Specify the calculation period and method: This not only demonstrates professionalism in the debt collection letter but also helps prevent disputes over how the debt amount is determined during negotiation or dispute resolution.
Prepare supporting documents to prove the payment obligation
A debt collection letter carries real weight only when accompanied by comprehensive supporting evidence. Enterprises should prepare the following:
The main contract and all relevant appendices;
VAT invoices and delivery/acceptance records;
Debt reconciliation statements or debt confirmation letters/emails;
Meeting minutes, correspondence, or transactional records evidencing the existence of the payment obligation.
Draft the debt collection letter in compliance with legal standards
The drafting process should strike a balance between legal clarity and courtesy to preserve potential for negotiation. A legally sound debt collection letter must comply with both formal and substantive requirements. Content requirements:
Information about the sender and recipient;
Legal basis of the claim (e.g., contract, invoice, or delivery record);
Specific amount owed, payment deadline, and request for response;
Response deadline (usually within 3–7 working days);
Legal consequences of non-compliance (e.g., referral to arbitration or court).
Choose an appropriate method of delivery
A debt collection letter may be delivered through various methods, provided that the sender can prove delivery and receipt. Common methods include:
Registered post with proof of delivery;
Direct handover with signed acknowledgement;
Official company email (preferably from a verified corporate address with timestamp);
Delivery through a legal representative, which adds professionalism and legal weight.
It is advisable to retain all delivery evidence (postal receipts, email records, or handover minutes), as these serve as critical proof in case of disputes or litigation.
Prepare contingency plans if the debtor fails to respond
Even after a properly issued debt collection letter, the debtor may not respond. Therefore, enterprises should plan follow-up actions to remain proactive and avoid impulsive measures:
Send a second reminder: Use a firmer tone while maintaining professionalism and include notice of potential next steps.
Propose a meeting or negotiation: Seek a mutually acceptable settlement and record the discussion in written minutes.
Engage legal counsel: If payment remains outstanding, forward the file to a lawyer for review, assessment of litigation options, and consideration of emergency measures if necessary.
The above is an overview of Checklist: 7 Essential Steps For ENTERPRISES Before Sending A Debt Collection Letter. If you have difficulties in finding a Law Firm to advise and support in the relevant legal field, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms in Vietnam with highly specialised teams in top legal fields such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.
