A Guide To Letters Of Demand For Outstanding Payment In Malaysia (+Templates)

A standard first step for debt recovery in Malaysia, a letter of demand for outstanding payment is a formal written notice asking someone to pay a debt, issued directly by a creditor or a debt recovery agency / lawyer representing them.

As our readers are likely the former, this guide covers the essentials of using letters of demand to recover what is owed to you, namely:

• what they are and what they can do for you

• the difference between your letter vs a lawyer's

• dealing with first-time debtors, and

• what to do if they ignore multiple reminders

Note: If you already have a plan, click here to skip to our demand letter templates.

Otherwise, let’s begin.

Clarifying what a letter of demand is

As a creditor handling your own debt recovery, think of a demand letter as a tool to encourage a debtor to pay because it’s the right thing to do, not out of fear of legal action. No matter how firm, a letter of demand is, by itself, just a reminder.

Unless dealing with a serial debtor, it can still be effective in prompting payment out of embarrassment or a desire to maintain the relationship.

Of course, the letter can still threaten legal action, but it is a paper tiger.

Why a lawyer's letter of demand is different

The difference lies in the follow-through: Any letter of demand can threaten legal action, but only a lawyer can file a civil claim for any amount above RM5,000, and if a debtor doesn't know this, they soon will.

It's why a lawyer's letter is said to carry legal weight, while threats by creditors and agencies – forgive our bluntness – are more bark than bite.

The left one nibbles your fingers; the right one takes off your hand.

Again, as most debtors don’t know this, any letter can be enough to prompt repayment, in which case it doesn’t matter who sends it 🙂

So let's get to the process.

Letter of demand for first-time debtors

For readers wondering what Malaysian law says about letters of demand, there is no legal prescription for how many to send nor its contents.

The general goal is to secure payment with the least amount of pressure necessary, preserving goodwill and future opportunities to work together.

In short, don’t burn bridges right away, but be ready to play the Foo Fighters.

Or play it anyway, it's a good song.

Our recommendation

We suggest sending two letters:

1. Overdue payment reminder, and if ignored

2. Final payment reminder and notice of legal action

We explain why below, but for now, if you want to write your own, make sure they mention:

• debtor and creditor details 

• a clear description of what the debt is for

• when it was incurred 

• agreed terms

• amount owed

• payment deadline

• consequences of non-payment

• copies of the agreement or invoice (optional)

• previous reminders sent (optional) 

• any proof of partial payments (optional)

Otherwise, here’s what you really came for: Free templates you can fill in and immediately send via email–you’re welcome!

Overdue payment reminder template

Final payment reminder template

Why two letters?

Because in our experience, that’s enough to tell if a debtor intends to repay the debt. 

If the debtor ignores the two letters, successful debt recovery will likely need a bit more legal persuasion, so welcome to the second category of debtors!

Can you send the letter of demand via WhatsApp?

Generally, yes, and unless you care about damaging the relationship, it's advisable to use multiple delivery mediums that can document the exchange including email, post, and SMS.

Debtors who ignore multiple letters / stubborn debtors

If a creditor has grounds for debt recovery, a debtor who ignores letters of demand is likely:

• stalling to run out the six year statute of limitations

• in financial distress / already insolvent; or 

• under the impression they have grounds to contest the debt

Regardless, yet more letters of demand from a creditor is unlikely to lead to a different outcome.

We strongly advise creditors in this position to either escalate to legal action or write off the debt and claim it as a tax deduction.

If the creditor wishes to pursue legal action, this is the point to engage a debt recovery lawyer, who will then issue a formal Letter of Demand threatening proceedings.

Here’s an example of a letter sent by Rule & Co to a delinquent debtor (redacted to protect their identity):

Even with the redactions, it's quite clear this letter makes it very clear to the debtor that this is their final chance to repay, and once sent, one of two things usually happen:

1. The debtor capitulates and repayment negotiations begin, or

2. The debtor continues resisting and the lawyer escalates proceedings and/or files a civil suit to obtain a judgment

Once judgment is secured, the debtor faces significant penalties if they continue to withhold payment–an entirely separate topic we cover in our guide to debt collection laws in Malaysia!

Costs to engage a lawyer to issue an LOD

The Malaysian Bar prohibits lawyers from advertising prices to prevent clients from choosing purely based on cost rather than quality of service. However, feel free to get in touch with us for a free case assessment and quotation.

In any event, an LOD is just a small part of a broader debt recovery strategy, which usually includes pre-court negotiations, payment follow ups and legal escalation.

For readers looking to engage a professional, the best next step is to get in touch so we can guide you on the most effective approach.

Regardless, we wish you a smooth debt recovery process 🙂

Get in touch for a free debt recovery assessment

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If your reminders have been ignored or you simply don’t want the hassle of chasing payments, Rule & Co is a debt recovery law firm that helps creditors recover debts via legal strategies that minimize upfront cost, maximise recovery, and safeguard your reputation.