What is a Dunning Letter?

A dunning letter is a formal written notice demanding payment or corrective action. It is usually sent before escalating to small claims court or hiring a debt collection attorney.

A strong dunning letter includes:

• The amount owed or nature of the dispute
• A specific deadline for payment or action
• The consequences if the issue is ignored

By sending a dunning letter, you establish a paper trail, demonstrate seriousness, and often resolve disputes without expensive lawsuits.

Purpose of a Dunning Letter

The main purpose of a dunning letter is to serve as a final reminder before escalating debt collection efforts. Businesses and individuals use them to:

• Recover unpaid invoices
• Enforce contract obligations
• Avoid costly legal battles
• Show good faith before filing a claim

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Benefits of Sending a Dunning Letter

Sending a dunning letter has multiple benefits:

• Encourages Quick Resolution – Many recipients pay immediately to avoid legal escalation.
• Saves Time & Money – Faster and cheaper than going to court.
• Creates a Legal Record – Serves as evidence if the case goes to trial.
• Demonstrates Professionalism – Shows you’re serious about debt recovery.
• May Be Legally Required – Some states require a dunning letter before small claims.

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Legal Considerations

Before writing a dunning letter, ensure compliance with laws such as the Fair Debt Collection Practices Act (FDCPA).

• Do not use threats or harassment.
• Keep the tone professional and factual.
• Reference the relevant contract or invoice.
• Always maintain proper documentation.

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How to Write a Dunning Letter (Step-by-Step)

1. Start with Your Contact Info – Include name, business, and address.
2. Address the Recipient – Use full legal name and mailing address.
3. State the Purpose Clearly – Example: “This letter is a formal demand for payment of $4,200 for products delivered on [date].”
4. Detail the Debt or Breach – Include invoice numbers, amounts, or contract details.
5. Set a Firm Deadline – Typically 7–14 days.
6. Explain the Consequences – Small claims court, attorney involvement, or credit impact.
7. Sign & Send – Use certified mail with a return receipt.

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What to Include in a Dunning Letter

Every dunning letter should include:

• Identification of the debt or dispute
• The total balance owed (including late fees/interest)
• A clear request for payment or action
• A specific deadline for compliance
• Next steps if ignored (lawsuit, collection, legal costs)

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How to Send a Dunning Letter

• Certified Mail with Return Receipt – Provides legal proof of delivery.
• Keep Copies – Store both digital and paper versions.
• Escalate if Ignored – Move to small claims court or legal collection if necessary.

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What Happens If the Recipient Ignores the Dunning Letter?

If your dunning letter is ignored, next steps include:

• Filing in small claims court
• Hiring a debt collection attorney
• Reporting the delinquency to credit bureaus

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Should You Hire an Attorney?

While you can write a dunning letter yourself, an attorney can help if:

• The debt is large
• The case is complex
• You anticipate legal resistance

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Filing a Small Claims Case After a Dunning Letter

If your dunning letter is unsuccessful, small claims court is often the next logical step. This process is designed for faster, lower-cost resolution of disputes under a financial threshold (varies by state).

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Key Takeaways

• A dunning letter is a powerful tool for debt recovery.
• Include the amount owed, deadline, and legal consequences.
• Send via certified mail for proof.
• Escalate to small claims or an attorney if ignored.

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Final Thoughts

A dunning letter is a low-cost, highly effective way to collect overdue payments or enforce contract terms. By writing a professional letter and sending it properly, you increase your chances of resolving disputes quickly—without immediately resorting to court.

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