How to Respond to a Letter of Demand for Money You Don’t Owe

You’ve received a letter of demand claiming you owe money. The language is formal, the tone threatening, there’s a deadline. But you don’t owe what they’re claiming — or you don’t owe it the way they say you do.

A letter of demand is not a court order. It’s a formal request for payment. If the claim is wrong, exaggerated, or already resolved, you have the right to dispute it. Ignoring it is dangerous. If you don’t respond and they escalate to tribunal or court, you risk a default judgment — even if you had a valid defence.

When You Should Dispute a Letter of Demand

Dispute the claim if any of these apply:

• The debt doesn’t exist — you never entered into the agreement or received the service
• The amount is wrong — they’re claiming more than agreed or ignoring payments you’ve made
• The work was defective — you withheld payment because the service or goods failed to meet contract standards
• They breached first — they didn’t deliver what was promised, so you’re not obligated to pay in full
• The debt is statute-barred — the limitation period has expired (typically six years in most Australian states)
• You’ve already paid — the demand ignores a settlement, payment plan, or previous payment
• Wrong party — the sender has no legal standing to collect

If you know the claim is wrong, act quickly.

What Happens If You Ignore a Letter of Demand

Silence is not a defence. If you ignore a letter of demand:

1. The sender may file a tribunal or court application
2. You’ll be served with a statement of claim
3. If you don’t file a defence, they can apply for default judgment — the court or tribunal rules in their favour without hearing your side
4. Once judgment is entered, they can enforce it through garnishment, property liens, or bankruptcy proceedings

Default judgment is one of the most common ways people lose cases they could have won.

How to Formally Dispute a Letter of Demand

Your response needs to be in writing, on the record, and supported by evidence.

Read the Demand Carefully

Identify:

• Who is making the claim (individual, business, debt collector, law firm)
• The exact amount claimed
• The basis for the claim (invoice, contract, damage)
• The deadline for payment or response
• Any reference numbers or prior correspondence

If the demand cites specific legislation or contract clauses, check whether their interpretation is correct.

Gather Your Evidence

Your response is only as strong as the evidence behind it. Collect:

• Contracts or agreements — the original terms
• Invoices and receipts — proof of payment, partial payment, or disputed charges
• Correspondence — emails, texts, letters showing the dispute history
• Photos or reports — if the claim relates to defective work or goods
• Bank statements — showing payments made or refunds received
• Witness statements — if someone else was present during key events
• Statutory declarations — sworn statements verifying facts

If they claim you breached a contract, find the clause they’re relying on and check their interpretation. If they claim you damaged property, get an independent assessment.

Write a Formal Response

Your response should be professional, factual, and unemotional. Structure it like this:

Heading: Response to Letter of Demand dated [date]

Opening paragraph: Acknowledge receipt and state clearly that you dispute the claim.

Body paragraphs: Set out the facts, refer to the evidence, and explain why the claim is wrong. Use headings if helpful (e.g., “Payment History,” “Defective Work,” “Breach by Claimant”).

Closing paragraph: State what you believe is owed (if anything), propose a resolution if appropriate, or confirm you will defend any tribunal or court proceedings.

Attachments: Include copies of key evidence. Don’t send originals.

Send your response by registered post or email (keep proof of delivery). Send it before the deadline stated in the demand. If no deadline is given, respond within 14 days.

Keep Records of Everything

From this point forward, assume everything could end up in a tribunal or court. Keep:

• Copies of all correspondence
• Proof of postage or email delivery
• Notes of phone calls (date, time, who you spoke to, what was said)
• Updated evidence as it becomes available

Document everything — responses, threats, settlement offers, or silence.

What the Other Party Can Do Next

After you dispute the demand, the sender has three options:

1. Drop the claim — if your evidence is strong, they may walk away
2. Negotiate — they may reduce the amount, offer a payment plan, or propose settlement
3. Escalate to tribunal or court — they file a formal application, and you’ll need to file a defence

If they escalate, you’ll receive a notice of claim or statement of claim. You must file a defence within the time limit (typically 28 days).

Avoiding Default Judgment

If the other party files a tribunal or court claim, you must file a defence within the time limit. If you don’t:

• The tribunal or court may enter judgment against you by default
• You’ll be legally liable for the full amount claimed, plus costs
• Enforcement action can begin immediately

Even if you’ve already disputed the claim in writing, a tribunal or court application is a separate process. Your earlier response is evidence, but it doesn’t replace a formal defence.

How Claim Done Helps You Respond to a Letter of Demand

If you’ve received a letter of demand and the claim is wrong, Claim Done can prepare a formal legal response in about 5 minutes.

Upload your evidence — contracts, invoices, emails, photos — and answer a short set of questions about the dispute. Our Programmatic Algorithms analyse the claim, identify the relevant Australian law, and draft a structured response citing the facts and applicable legislation.

The response is formatted for delivery to the sender and can be adapted if the matter escalates to tribunal or court. You get a professionally prepared document without paying hourly legal fees.

Fixed fee. No subscription. Done fast.

Start your legal response now, or if the matter has already escalated, prepare a tribunal defence pack to protect yourself from default judgment.

Frequently Asked Questions

Do I have to respond to a letter of demand in Australia?

You’re not legally required to respond to a letter of demand, but ignoring it is risky. If the sender escalates to tribunal or court and you don’t file a defence, they can obtain a default judgment against you — even if you had a valid defence. Always respond in writing if you dispute the claim.

How long do I have to respond to a letter of demand?

Most letters of demand give you 7 to 14 days to respond. If no deadline is stated, respond within 14 days. If the matter escalates to a tribunal or court claim, you’ll typically have 28 days to file a formal defence.

Can I be sued if I respond to a letter of demand and dispute it?

Yes. Responding to a letter of demand doesn’t prevent the other party from filing a tribunal or court claim. But your response becomes evidence in your favour, and it shows you acted reasonably. If you don’t respond and they escalate, you risk default judgment.

What evidence do I need to dispute a letter of demand?

You need documents that prove your version of events: contracts, invoices, receipts, emails, text messages, photos, bank statements, or witness statements. The stronger your evidence, the more likely the other party will drop or reduce their claim.

Can Claim Done help me if the letter of demand has already gone to court?

If the matter has escalated to a tribunal or court claim, you’ll need to file a formal defence within the time limit (typically 28 days). Claim Done prepares tribunal response and defence packs to help you respond quickly and affordably.