What To Do When A Friend Or Family Member Won't Repay A Loan

Law Blog

When you loan a close friend or family member money, you expect to get your money back. Unfortunately, even those people you trust can sometimes fail to repay a loan as agreed. In this case, it might be necessary for you to take a more aggressive approach towards repayment. Since dealing with this type of situation can be extremely sensitive, here are some tips to assist you with the process.

Prepare A Default Letter

Prepare a default letter to mail to the person you loaned the money to. Default letters serve a dual purpose. First, they serve as a reminder that repayment is due. Second, in the event you have to take this matter to court, this letter will serve as evidence that you did inform the individual of their default.

Within the letter you need to include new terms of repayment, such as a new payment structure or a demand for immediate payment. You also want to be sure to include specific time parameters by which you expect the matter to be addressed. Including all of this information will come in handy later on down the line. After you have prepared the letter, send it certified mail so that you can confirm receipt.

Research Local Laws

After you've sent the default letter to your friend or family member, don't just sit back. Use this time to start researching local laws. In the event the loan still isn't repaid, you will already be prepared to progress forward. First, find out what the small claims court limits are within your state; the average is somewhere between $5,000 and $10,000.

In addition to financial parameters, each state also has a statute of limitations for past due debts. For example, a state might say you are unable to legally pursue a debt that is 18 months old. Once you have this information you will know how to proceed.

Legally Enforce Payment

If all attempts for repayment have failed, it's time to legally enforce repayment. Depending on the value of the loan, you will pursue a small claims or civil suit. For each process, completing a Plaintiff's Claim Form is the typically first step.

The claim form details the specifics of your case, such as repayment terms. After filing the form and paying any fees, the court will review your claim for approval. Should your case be accepted, you and the defaulter will receive a date for the case to be heard before a judge. If the court sides in your favor, the court will legally require repayment of the original loan and your court fees.

If this entire process seems overwhelming, an attorney (like those at Coley Hennessy Cassis Ewasko) will be more than happy to assist you from start to finish. Best of all, you may be able to include your attorney fees within your claim.


30 July 2015