Guarantor, Trying To Collect From
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 Individualcc Original Debtor or Debtors
Guarantor, Trying to Collect from
Review ListThis 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.
1. 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).
3. 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.
Frequently Asked Questions
What is a guarantor letter trying to collect?
A guarantor letter trying to collect is a formal demand sent by a creditor to a guarantor for payment of a debtor's outstanding obligations. The letter states that the debtor has defaulted and that the guarantor is being held responsible under the terms of the guaranty. It typically includes the amount owed, a copy of the guaranty, and a demand for full payment plus interest.
What should I do if I receive a guarantor collection letter?
If you receive a guarantor collection letter, you should review the enclosed guaranty and verify the debt amount and the debtor's default. The letter may offer the option to work out a payment plan, either separately or together with the debtor. You may also want to seek legal advice to understand your rights and obligations under the guaranty.
Can a creditor collect from a guarantor if the debtor defaults?
Yes, if the debtor defaults, the creditor can demand payment from the guarantor according to the terms of the guaranty. The letter indicates that the creditor is unable to collect from the debtor and is therefore pursuing the guarantor. The guaranty typically allows the creditor to collect the outstanding debt, interest, and possibly legal and collection costs.
What information must a guarantor collection letter include?
A guarantor collection letter should include the name and address of the guarantor, a statement that the creditor holds the guaranty, the name of the debtor, the amount guaranteed, and the outstanding debt amount. It should also state that the debtor has defaulted and demand payment in full plus interest. A copy of the guaranty is usually enclosed.
Is a guarantor legally responsible for the debtor's debt?
Yes, by signing a guaranty, the guarantor agrees to be responsible for the debtor's debts and obligations to the creditor. If the debtor defaults, the creditor can seek payment from the guarantor as outlined in the guaranty. The letter serves as a formal demand for payment under that legal obligation.
Can I negotiate a payment plan with the creditor as a guarantor?
The letter states that the creditor would be delighted to consider working out a payment plan if the guarantor, and possibly with the debtor, need to do so. This suggests that negotiation is possible. You may contact the creditor to discuss a payment plan that works for you.
What does it mean when a letter says information will be used to collect this debt?
This statement is a legal notice informing the guarantor that any information they provide may be used by the creditor to collect the debt. It is a required disclosure in debt collection communications. It means that anything you say or provide could be used in the collection process.
Can the creditor collect legal and collection costs from the guarantor?
The letter mentions that the attached guaranty provides for the creditor's ability to collect legal and collection costs. Therefore, if the guaranty includes such a provision, the creditor may seek to recover these costs from the guarantor. You should review the guaranty to confirm the specific terms.
What interest rate can a creditor charge a guarantor on a defaulted debt?
The letter states that interest will be charged at the rate provided for in the Agreement. The specific rate is left blank in the template, so it depends on the terms of the guaranty or underlying agreement. The creditor can demand interest from the date of the letter forward.
What are my options if I cannot pay the guarantor debt in full?
If you cannot pay the debt in full, the letter indicates that the creditor is open to considering a payment plan. You may propose a plan that fits your financial situation. It may also be beneficial to involve the debtor to work out a solution together.
