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How To Legally Collect A Debt From A Friend Or Family Member

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When friendship or a personal relationship is involved, debt collection has an aspect not found in a typical case: possible loss of the friendship or relationship. Be prepared, money has turned mother against child and brother against brother many times..

When friendship or a personal relationship is involved, debt collection has an aspect not found in a typical case: possible loss of the friendship or relationship. Before seeking legal relief you should weigh the debt against that possible loss. You may believe the person is upright, honest and that the relationship is strong enough to withstand debt collection. But be prepared, money has turned mother against child and brother against brother many times.

The first thing to know is that all states have a time limit on when you can file a debt case that can be as short as two years. The second thing to know is that in absence of a signed and dated document specifying the terms of the loan, it will be the debtors word against yours in court. Sometimes very honest people have bad memories and if time has passed, they may truly believe the money or merchandise exchanged was a gift rather than a loan needing to be paid back. Or they may not remember the amount correctly and claim the borrowed amount was substantially less than the actual amount. If they believe any of that they will likely make a convincing case. So your first order of business is to locate the agreement signed by both parties at the time the loan was made or ask them to sign one now, although at this point they do have the right to refuse that request.

In most states "beyond a shadow of a doubt" is not the legal standard necessary to prevail in a non-criminal case such as this, but rather "a preponderance of the evidence" is what you need to prove. Often it's simply helping the judge put two and two together that will sway the decision in your favor.

Before filing be very clear about dates, times, other details and list them, not just regarding the original loan, but also regarding any requests for payment or payments made. Details include method of contact, check numbers, dates phone messages were left, what was discussed, etc. Credit card receipts and bank statements can often help establish that money was moved on a certain day.

Were there any witnesses who can help establish the fact the loan was made? The witness does not have to have been present at the loan's origination, it could be someone present when the borrower made a statement such as agreeing to pay a certain amount on a certain day (which would prove the borrower knew it was a loan to be paid back). Canceled checks of their payments would establish the same.

Once you have all the facts collected, it's time to file your case in the appropriate court. Most of these types of cases are handled in small claims courts without the need for a lawyer. A judge will hear the facts, permit both sides to testify, then render a decision. Note that small claims courts have dollar amount limits that vary state-to-state.

No one likes to be sued. In the interest of salvaging the relationship you might want to request payment again prior to filing and warn the borrower that filing will be your next step. At this point any attempt to stall should be met with the opportunity to sign an agreement articulating the new promise to pay including the date signed, date the late payment is due, any interest accrued and the amount expected to be paid at that time, along with details of how future payments will be remitted.

You must maintain a businesslike approach to collecting the debt, but kind words; assurance that it's a business matter, not personal; and a light attitude; even joking about the situation, can go a long ways towards preserving the personal relationship with your borrower.  

1 comment

Mark Robinson
Posted on May 26, 2014

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William Watson

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