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A demand letter for payment is a notice requesting payment from a debtor for an amount owed by a specific date. It serves as a final warning before legal action, capturing essential information and using a template. Sending this letter is important as it alerts the debtor, records the reason for payment, specifies the amount owed, sets a due date, and provides a written record for potential legal disputes. It can also offer a reduced settlement as an incentive while ensuring compliance with legal requirements.