A Demand Letter is a letter to demand payment or some other action. Essentially, a demand letter sets out why the payment or action is being claimed, how it should be carried out (e.g. payment in full, payment over time), and directions for the reply and a deadline for the reply. Demand letters are frequently used to maintain some goodwill between business parties and they often encourage payment, in order to avoid expensive litigation. Most demand letters contain the 'threat' that of formal legal proceeding. A Demand Letter that requests payment of a debt may also be called a Debtor Letter.