Sending a demand letter to your Chinese debtor can increase your chances of successful debt collection, though it is not a guarantee. Here’s what you need to know about using demand letters in China:
1. What is a demand letter in China?
A demand letter is a written request from your Chinese lawyer to your debtor, urging them to pay the outstanding debt.
2. When can you send a demand letter?
If a Chinese debtor has an unpaid debt, a lawyer can send a demand letter on your behalf. The letter can express your stance on the debtor’s breach of contract, request correction of the breach, or demand payment, refund, or compensation.
3. What are the practical effects of a demand letter?
Sending a demand letter to the debtor may show that you have hired a collection agency in China and that you take the debt seriously.
4. What are the legal effects of a demand letter?
- Interrupting the limitation period: In China, a person has three years to request protection of their civil law rights in court. If you fail to collect a debt within three years, you may lose your right to claim it. A demand letter can reset the three-year period.
- Notifying: A demand letter can serve as notification of rescission (termination of a contract) or of a claim. It can also clarify facts in complex disputes and collect evidence for future litigation.
- Proving bad faith: If the debtor refuses to pay the debt after receiving a demand letter, we may be able to prove their bad faith in future litigation. A demand letter can also transfer costs if the debtor ignores it and continues to refuse payment.
5. What are the disadvantages of a demand letter?
- Alerting the debtor: A demand letter can alert the debtor that you are prepared to take action, potentially leading to quicker asset concealment and removal, making debt collection harder.
- Unenforceability: A demand letter cannot force a debtor to pay the debt, so it is possible for them to ignore it.
If you are struggling to recover debt from a Chinese debtor, consider sending a demand letter with the help of Wolster & Co. Our experienced team of lawyers can assist you in drafting and sending a demand letter that can improve your chances of successful debt recovery. Don’t wait any longer – contact us today to learn more about how we can help you recover the debt you are owed.