How to Forgive a Sour Debt
Although you may associate debt forgiveness, or debt relief, with international diplomacy or multinationals, it is not just governments, companies and banks that sometimes cancel debts owed to them. You yourself may lend money to someone, only for her debt to turn sour. This means the borrower is unable to pay back the money she owes you. People decide to forgive debts out of compassion; because they feel it's the ethical thing to do; because they have no choice, in accordance with their religious beliefs or because they weren't expecting the money back anyway. You can opt to forgive part of the debt or all of it.
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Instructions
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Forgiving Part of the Debt
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Decide how much of the debt you're going to forgive by discussing it with your debtor as well as considering your financial constraints. Ask her why she is having problems repaying the debt, how bad her problems are and how much of the debt she is able to repay. Work out how much of the debt you can afford to cancel and then negotiate with your debtor to reconcile your respective positions until you come to a mutual decision.
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Work out a plan to help your debtor repay the part of the loan she still owes you. This could involve extending the loan period or reducing the interest charge. If the debtor is struggling to pay you any cash at all, suggest that she pay you in kind. This may involve working for free for you or giving you something of monetary value other than cash.
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Once you and your debtor have agreed on the terms of the partial debt forgiveness, type up an agreement and print off at least two copies---one for yourself and one for her. This ensures that both of you have written evidence of the agreement you've come to.
Forgiving All of the Debt
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Before you decide to write off the entire debt, consider the implications of doing so. Ask yourself if you can afford to do it, financially and emotionally. Will total debt forgiveness leave you low on money or feeling bitter? Be certain that you're willing to forgive the whole debt before telling your debtor that you will.
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Discuss the issue frankly with your debtor. Tell her your reasons for forgiving the whole debt so that you both know where you stand. It may help to think of the debt cancellation as a gift to your debtor and then to tell her why you want to give her a gift, so she does not think of the forgiveness as a charity handout.
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Write in a greeting card that you forgive your debtor the whole debt and give the card to her. This not only gives her written evidence of the debt cancellation, it also supports the notion of the cancellation being a gift.
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References
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