How to Collect a Debt from Friends and Family

Have you ever loaned someone money and they never paid it back as promised, and now they are avoiding you? Have you ever co-signed for someone who didn’t pay their debt and now you are responsible for it? Did you ever lend someone an item for a short time and they now refuse to return it? These are all scenarios of you being owed something; but how do you collect on it? Here are a few suggestions.

Instructions

Difficulty: Moderate

Things You’ll Need:

• agreement in writing

How to collect on a debt from friends and family

1. Whenever you are lending money or items to someone, always get them to sign a promissory note which legally binds them to the debt. No matter how you feel about them then, when time and friendship passes, this will be your legal proof that they owe you should they neglect their responsibility to you.
2. If you choose not to use legal documents, make sure the transaction of lending is done in front of a witness who will testify on your behalf should you need to proceed with legal action against them.
3. Document each conversation with the debtor or get someone to witness when you ask for money or objects to be returned.
4. If the person acknowledges the debt but can't pay it back as promised, be willing to compromise: accept partial payments, because then, at least, you are getting it back. But get this new payment agreement in writing for your own protection. If they fail to honor this, then you can use it as proof of the debt should you need to take legal action against them.
5. If it becomes necessary to file a legal claim, make sure that you have the documentation and/or witnesses to prove your claim. Judges don't like to make legal decisions on hearsay evidence.
6. After a claim is filed and providing the debtor responds by filing a defense, there will be an opportunity to sit before a mediator who will try to come to a compromised resolution for repayment. This action will also support your case should you need to go to trial.

Tips & Warnings

• Remember, the judge’s decision in a trial is based on evidence and facts. If all you have is your word against there’s, it will probably never make it to trial, so let your session at mediation work for your benefit.
• You need to be aware that friends and family don’t like to be sued by other friends or family, and so filing a law suit against them could permanently end your relationship with them.