Guarantor, Letter trying to Collect From
Date:
Name
& Address of party written to
Dear
Sir or Madam:
We
are the holder of your Guaranty of the debts and obligations of _____________
(Name of Person) whose debts are being Guaranteed ("Debtor") to us in
the amount of $_____________________, a copy of which is enclosed.
The
Debtor has defaulted in payment to us.
In accordance with the terms of the Guaranty, we hereby demand payment
in full of the outstanding debt in the amount $_________________________,
together with interest thereon at the rate of ___ Interest as provided for in
the Agreement, from this date forward.
We
are sorry the matter has reached this stage but find no alternative since we
are unable to collect these funds from the debtor. We would be delighted to consider working out
a payment plan if you, and with your persuasive powers with the debtor, need to
do so separately or together.
Please
note that while we would like to discuss this matter with you in depth we are
obligated by law to inform you any information received will be used to collect
this debt.
As
you undoubtedly know, the attached guarantee provides for our being able to
collect our legal and collection costs in this matter. Therefore, it is in your interest to pay us
immediately, cause us to be paid by the original debtor, or work out a solid
payment plan immediately.
Please
contact us immediately to advise us of whether you will pay the demand in full
or request another payment plan. If we
do not hear from you in 15 days, we will be forced to place this for collection
in the first of several steps to reduce this debt to a Court Judgment to be
enforced against the original debtor and yourself.
You
can reach us at the above number on the letterhead.
Yours
very truly,
_____________
Authorized
Employee or Individual
cc
Original Debtor or Debtors
Guarantor, Trying to
Collect from
Review List
This
review list is provided to inform you about this document and assist you in its
preparation. Collecting money is more a
sales function than anything else. This
is especially true in your first contact with the “other side.” In this case, this is the first direct letter
to the Guarantor, giving them the bad news that they may have to come through
and pay the debt for the party they guaranteed if for.
Since
you only have one chance to make a first impression, it is important to use it
wisely here. You have substantial legal
leverage with a guarantee to back up any threats you wish to make later. On your first contact, however, we strongly
recommend you try to encourage payment as opposed to launch a hardball attack
on the other side. First, the Guarantor
will be mad at the nonpaying debtor. You
can use that to your advantage and encourage them to help you collect the debt
from the debtor so they do not have to do so.
The
best way to achieve this is to get this initial letter out early in the
collection process. In other words, get
the letter out to the guarantor before the debt is very late and while small
payments can bring it current and possibly get it reinstated, depending on your
circumstances and the credit standards of your company, or yourself personally.
Another
reason for a more friendly approach is that collection agents and lawyers have
pursued debts more vigorously in the last decade than ever before, with a more
varied approach and with hardball tactics.
Debtors have been worn down by the process and are quick to seek
bankruptcy protection, as the increasingly caseload shows. You don’t want to drive them there and you
don’t want them to be immediately in that total adversary position with you. We recommend you initially try to get them
back on a paying basis.
- Be sure you include the legal warning that all information received will be used to collect a debt. Be sure to orally advise them if you speak with them.
2.
Sign the letter and mark 21 days off to send a
second demand letter (21 days provides a little extra time for the mail and
delays).
- We recommend the person handling the matter sign the letter personally and include a direct phone line and extension as applicable. The personal touch gets money in the door, in our experience, as well as being a politer way of operating.
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