What Happens If I Ignore a Demand Letter?

What does not happen

A demand letter is a private letter. Ignoring it does not:

• create a judgment, a lien or any enforceable obligation;
• allow the sender to garnish accounts, seize property or report the debt as a judgment;
• count as an admission that the claim is valid;
• waive any defense you have.

The sender's lawyer knows this. The letter is a request backed by the possibility of a lawsuit, and the possibility only becomes real when a petition is filed and served. Whether to answer at all is a judgment call, worked through in whether to respond to a demand letter. This article is about what follows when the answer is no.

What does happen: the sender decides

Silence hands the next move to the other side. Four outcomes are common.

Nothing. Some letters are sent to test the waters, or because a client insisted. If the claim is weak or small, silence may end it. You will not know which kind of letter you received until months have passed.

A second letter. Often shorter, often with a draft petition attached. This is the sender confirming that the first letter was received and ignored, which is useful to them later.

A lawsuit. A petition filed in a Texas county court or district court, served on your registered agent or at your office. From that moment the choice to ignore is gone; see below.

Something other than a lawsuit. Depending on the claim: a lien filing on your property, a complaint to a licensing board, a notice to your lender, or in a construction dispute a notice to the owner that stops your payment. Each is governed by its own rules, but each is more disruptive than the letter was.

Attorney's fees start to accrue against you

This is the most concrete cost of silence in a Texas contract dispute. Under Texas Civil Practice and Remedies Code § 38.001, a party who wins a claim for breach of an oral or written contract, services rendered, labor, materials or a sworn account can recover reasonable attorney's fees. Section 38.002 conditions that recovery on three things: the claimant has a lawyer, the claim was presented to you, and you did not tender the just amount within 30 days.

A demand letter is presentment. Day 31 after you received it, if any part of the claim is valid, the sender's legal bill from that point forward becomes a recoverable item against you. The fees often grow faster than the underlying debt. A response that tenders the undisputed part within the 30 days cuts that off for the amount tendered, which is why the response when you owe some of the money is its own topic, covered in responding when the letter is partly right.

The settlement window closes

Before suit, the sender has spent the cost of a letter. After suit, they have paid a filing fee, drafted a petition and arranged service, and their lawyer has a case to run. Every dollar they spend is a dollar they will want back in any settlement, and under § 38.002 it may be a dollar they can recover by judgment. The discount a sender will accept to avoid litigation is largest before they have started it.

Silence also hardens positions. A sender who gets a measured response learns there is a counterparty who can be reasoned with. A sender who gets nothing concludes the only path is the courthouse, and plans accordingly.

Example

Suppose a Dallas staffing agency receives a demand for $27,000 in unpaid placement fees and sets it aside, believing the client will cool off. Thirty days pass. Sixty days later a petition arrives, served on the registered agent, and the agency now has until 10:00 a.m. on the Monday after 20 days to file an answer. The petition seeks $27,000 plus attorney's fees under Chapter 38 and pre-judgment interest. The agency's own lawyer confirms that about $19,000 of the fees is owed under the signed agreement. Had the agency tendered $19,000 within 30 days of the letter and disputed the rest in writing, the fee claim on the $19,000 would have been defeated and the remaining $8,000 dispute might never have been filed. Instead the agency now defends a lawsuit over $27,000 in which the other side's fees are growing weekly.

If a lawsuit follows, the deadline is real

A served petition is a different thing from a letter. Under Texas Rule of Civil Procedure 99, the citation served with the petition directs the defendant to file a written answer by 10:00 a.m. on the Monday next after the expiration of 20 days after service, and warns that a default judgment may be taken otherwise. A business that ignores the citation the way it ignored the letter can find a judgment entered against it for the full amount claimed, plus fees and interest, without a hearing on the merits.

Default judgments can sometimes be set aside, but the standard is demanding and the effort costs more than an answer would have. What service means and what the first days after it require are covered in what happens if you get served with a lawsuit in Texas, and the undoing of a default in whether a default judgment can be undone.

Your duty to preserve evidence has probably begun

Texas law requires a party to preserve evidence once it knows or reasonably should know that there is a substantial chance a claim will be filed and that evidence in its possession is relevant. The Supreme Court of Texas set out the framework in Brookshire Brothers, Ltd. v. Aldridge in 2014, including the remedies a trial court may impose when evidence is lost, up to an instruction telling the jury to presume the lost evidence was unfavorable where the loss was intentional or left the other side unable to present its case.

A demand letter is strong evidence that litigation was reasonably anticipated from the day it arrived. Ignoring the letter does not suspend the duty. If routine deletion of emails, chat messages or device data continues after the letter, the company may later have to explain the gap to a judge. The practical steps are in what a litigation hold requires.

Insurance notice may be lost

Many business liability policies define a claim to include a written demand for money or services and require notice to the carrier within a stated time or as soon as practicable. A demand letter ignored is often a demand letter never reported. If a lawsuit follows and the carrier learns of the earlier letter, late notice can be a basis to deny coverage or a defense. Reading the policy the week the letter arrives costs nothing.

When silence is a reasonable choice

There are letters that deserve no reply: demands from parties with no plausible claim, form letters from collection operations that cannot identify the debt, or demands addressed to the wrong entity entirely. Even then, silence should be a decision, made after reading the letter against your records, calendaring the deadline and preserving the file. A two-sentence acknowledgment that denies the claim and reserves all rights costs nothing and takes the "ignored" label off the file. For anything with substance, the consequences above are the price of the drawer.

Tina Wysk represents Dallas businesses that receive demand letters, from the first assessment of exposure through any lawsuit that follows.