What if a friend or relative has not paid back an amount they loaned from you during an emergency?
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Remember what the terms were. Was it clear that this was a loan? What was the deadline set?
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It could be uncomfortable, but sometimes a simple reminder is all it takes to jump-start repayment.
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Facts not feelings
Framing the conversation around facts rather than feelings, or unspoken opinions, can prevent confusion.
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Bring up the issue calmly and privately; avoid making assumptions. Avoid harsh or accusatory language.
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Acknowledge what’s happening in your friend’s life and yours. Then, you can discuss how to move forward.
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You can revise the repayment plan. They could also chip away at the balance by periodically paying bills.
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Repay in services
If your friend is struggling to come up with cash for repayment, perhaps they can repay you with service.
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If nothing works out, waiving the debt could be the best move for your peace of mind and relationship.
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But think how that could impact you. You might reconsider giving this person, or anyone, money again.
As far as unpleasant tasks go, asking a relative or friend to repay a loan ranks up there with getting your wisdom teeth pulled or spending a weekend alone with your in-laws.
The best way to avoid this awkward conversation?
“Don’t lend money to friends in the first place,” says Peter Post, director of the Emily Post Institute. Of course, that advice isn’t going to help if you’ve already ponied up the cash. Here’s what will.
THE GROUND RULES
Talk in person. Don’t text, email, or call; faceless communications are too easily misread. Instead, invite your friend or family member to chat over coffee or a beer so the atmosphere is more relaxed, says Randy Cohen, author of Be Good: How to Navigate the Ethics of Everything.
Let the relationship guide you. Decide what’s more important: getting your money back or staying on good terms with the borrower. If you care more about the person than the cash and you’re in a position to do so, you may be better off forgiving the debt.
YOUR BEST APPROACH
1. Opening gambit. “I was happy to lend you the money when you needed it. That’s what friends do.”
The strategy: You’re gently reminding your pal that you came through when he or she was in trouble.
“Putting it this way shows you sympathize with your friend,” says Cohen. “Chances are, the person feels bad about not paying you back. An understanding tone decreases your chances of a hostile response.”
2. Be direct. “When do you think you will be able to pay back the $500 I lent you?”
The strategy: Hinting will get you nowhere, says Philip Galanes, author of Social Q’s: How to Survive the Quirks, Quandaries, and Quagmires of Today, because the person may misunderstand (perhaps willfully) what you’re asking.
Like ripping off a Band-Aid, the process will be less painful if you do it quickly and directly.
Start off nicely; getting angry is more likely to result in the borrower pushing back than if you stay calm.
“There’s no sense in starting Defcon 3,” Galanes says.
3. Add urgency, as needed. “We’re going to get hit with some really big tuition bills soon and could really use that money.”
The strategy: Of course, you don’t need to justify asking for your money back, but it can be helpful to cite a pressing reason — as long as it’s true.
“Evoking a specific thing makes repayment seem more like a necessity than simply an option,” says Cohen.
4. Provide a deadline. “I’d really like to get the money back before the end of June.”
The strategy: Specifying a schedule for payback is crucial. Otherwise, the loan may hang out there indefinitely, even if the borrower has given lip service to paying you back — and you’ll just have to revisit the conversation at a later date.
5. Offer flexibility. “Would it be easier for you to pay me back over time, say, $100 a month?”
The strategy: If the borrower pushes back or you know he will have a tough time coming up with the cash, etiquette expert Cynthia Lett suggests breaking repayment into smaller chunks or reaching another compromise.
After all, you must really care about this person; otherwise, you would never have lent him the money.
There’s a saying that goes, “Lend only the amount of money you can afford to lose.” When you lend money to friends or family, you’re working under the assumption that they will pay you back promptly to preserve your relationship.
But that isn’t always the case, and as we all know, it can be awkward to repeatedly ask for your money back. You start talking to them more often, dropping subtle verbal hints, doing weird little gestures, and even gesticulating strongly with your wallet at times to indicate that “Hey, I need my money back”. It just doesn’t work, though.
If you’ve tried all those weird actions and still feel unsure about how to ask for your money back without affecting the relationship, why not try out the 5 methods below?
1. The polite reminder
Sometimes, people genuinely forget that they owe you something – not everyone is out to get your money. This is especially true if it’s a small amount like a couple of ringgit. A simple reminder to the borrower can work for you in these situations.
Be courteous and always use polite language when reminding someone about the debt they owe you. (even thought you really just want the money back). Just ask if they remember their debt and when they can pay it back. A good example sounds like this, “Hey, do you remember that I lent you money last month? Was wondering when you could give it back.”
2. Ask for an update on what they used the money For
People borrow money for a specific purpose, and they usually let you know what this is when they make the request. If, for example, money was borrowed to pay for tuition, ask them how the school is going. This lets you ask for the money in a very passive way and can prompt them to remember their debt, it might even open up the conversation about when they might be able to pay it back.
3. Let them pay for the next round
If it’s a small debt, you can ask your friend to pay for your meal at the next gathering, and that this can be deducted from their debt to you. This works because you get some or all the amount paid back and it serves as a reminder that they owe you money. But of course, always be polite about it – it’s not nice to be very aggressive even if they owe you money.
4. Ask them to help you out
You were able to help them out when they needed it, now’s their chance to return the favor. If you have needed the money back for something, ask them to help you out by paying you back the debt they owe. If you’re feeling slightly more generous than usual and don’t find the money necessary, then you could even ask them for a non-monetary favour in lieu of the money as well!
5. Give them flexible terms
Offer to have the debt paid back in installment. This works because you’re giving the borrower flexible payment terms and you’re creating a timeline for when the debt will be completely paid off.
An unpaid debt between friends can strain relationships, after all, money is rather sensitive matter. Getting angry at someone who owes you money is a quick way to lose a friend and a lot of times, your relationship is worth more than the money owed.
Being left unpaid is a real possibility when you lend to friends or family, so only lend out an amount that you are comfortable never seeing again. But when it’s time to ask for your money back, asking for it politely helps you save the relationship.
Want to avoid the awkward situation of asking a financial favor from your friends? You can do that by comparing the best personal loan in town and get the financial aid you need now at our personal loan comparison site!
It might be tempting to wonder how to shame someone who owes you money, but this is rarely a good idea.
In many cases, this will motivate people to keep the money from you out of spite.
Below, I will share a list of more effective strategies to get your money back based on empathy and cooperation.
In my role as a life coach, I am often helping my clients learn how to negotiate with people in a way that feels like a win-win.
That’s exactly what I am planning to do here.
Let’s dive right into it.
How To Respond To Someone Who Owes You Money
Here are 11 recommended steps to get your money back with the minimum of fuss.
1. Set A Date
Whenever you lend someone money, it’s in your best interests to agree on a date for when it can be paid back.
Without this, you put yourself in danger of the recipient delaying your repayment endlessly.
This can also allow the recipient to feel that you have no right to be upset with them, as they wouldn’t have broken any terms of your agreement.
If you’re lending a significant amount of money, it’s recommended to get the repayment terms of this loan (the money owed and the agreed due date) written down and signed by the recipient. This is called a promissory note. This paper trail will support you if you have to escalate things legally.
2. Face To Face
The most effective way to ask for your repayment is face-to-face.
It would be easy for the recipient to ignore a phone call, delete a text message or throw away a letter in the post without a second thought.
They can’t ignore a face-to-face conversation so easily. In this case, they’ll at least have to give you a response.
In most cases, the social pressure and awkwardness of being asked to pay back a loan will be enough for you to get the money back straight away.
3. Allow The Debtor To Save Face
You don’t need to be aggressive or demand payment when you first mention this personal loan.
In fact, it can be effective to think the best of them and assume they forgot to pay you back.
A simple question like “do you have that money you owe me” can suffice.
It’s important to remember that no-one likes being bossed around, even when it is completely deserved.
It can leave people feeling small and unimportant. Sometimes, people will dig their heels and do whatever they can to get revenge on people who make them feel like this. In this case, this could mean they decide to tell you they don’t have the money.
So, at least initially, it can pay to be polite and friendly to whoever you’re dealing with.
4. Don’t Beat Around The Bush
If this person isn’t able to pay you, it’s time to get serious. You need to show you’re not a pushover and that you will continue to pursue the money.
There’s still no benefit to being aggressive, but it won’t help you to be submissive either. Maintain eye contact and tell them you need payment now.
At the very least, this should prompt them to explain why they’re unable to pay you now – or to start negotiating a payment over a different time frame.
5. Hear Their Reason
If they don’t explain why they don’t have the money, prompt them for a reason.
It’s important that you actually listen to their reason for non-payment and try to empathise with them.
Perhaps you can help them come up with a solution. Also, as angry as you may be, it’s in your best interests to maintain good favor with your debtor.
Now, on some occasions, you’re going to determine that their excuses are extremely weak. Perhaps they’ll say they needed money for another urgent reason, when you know they were out spending money at some other party last night.
If this is the case, you need to calmly let them know you think they’re not taking the debt seriously. In such cases, you might want to push harder to see if they can afford to pay you back now.
Sometimes, there will be a genuine emergency they had to pay for, or they will genuinely be waiting for payments from someone else. In this case, you’ll want to negotiate a new schedule for them to pay you back.
6. Focus On What’s In It For Them
When you’re owed money, it can be tempting to focus on why you need the money so urgently. Maybe you have clients or employees you need to pay or your own debts to pay back.
The thing is: most people won’t care about that as much as they care about themselves, especially if they’re not your friend. In any negotiations, it’s therefore important to let the other person know what’s in it for them.
If they are your friend, it’s worth mentioning that this delayed payment is harming your opinion of them. If you feel upset or disrespected, you can calmly tell them that.
More importantly though, make them aware of the future efforts that you will make to get the money back.
If you’re willing to hire a collection agency or take legal action in the small claims court to retrieve the loaned money, let them know.
You don’t need to take a threatening tone or become overly emotional. But, when this person knows the consequences of not paying, they will often make payment of your loan more of a priority.
7. Mention Why You Need The Money
If there are harsh personal consequences in your life as a result of the original loan not being paid, it can help to explain that to your debtor too.
Once this person sees that other people’s lives are being harmed by their actions – and it’s not just numbers moving from one account to another – they’re more likely to feel guilty and take faster action to pay the money back.
This can be particularly powerful if you two are good friends.
Of course, there doesn’t need to be a reason why you need quick payment, other than the fact that you lent them the cash and expect it to be paid back.
As broke (and therefore cheap) college students, we’ve all been there. We have lent money out of convenience, maybe to pay for a taxi to Destiny or an Uber home after a night out. Sunday night rolls along and the dining hall is closed so your friend agrees to go in on Chinese food with you… and forgets to pay you back….
This is a tough situation to be in because you don’t want to seem cheap, but all that money does end up. And sooner or later, you’re rummaging for pennies in your stuffed backpack so you can pay for your laundry.
There are three ways you can approach this without making your friends feel attacked.
- The straight up “I need money for food/laundry/dues/clothes/groceries… do you have the five dollars I lent you last week?” This method usually surprises the receiver because they usually ( and hopefully) just forgot to pay you back. A common response is “of course!” However, the downside to this approach is that it might embarrass them.
- You can make it seem like it’s their idea. The subtle hint-dropping works best here, but does not always yield results. A common way to drop hints is to say something like “I am running out of money and so many of my friends owe me money but I keep forgetting to ask for it back”.
- The classic “I got the last one, so do you got the next one?” This scenario would occur when you are out with your friend, maybe getting coffee or breakfast. Warning: it could get a little awkward. If your friend is confused, it could take some explaining on why they owe you money.
What do you do if your friend keeps saying she will pay you back but never does?
This one’s tricky, but the best way to get your money back is to set a deadline. You can do this by saying something along the lines of “I wanted to run to the grocery store on Saturday at noon, do you think you could have the money to me by then?” If it comes down to this, it is better to be straightforward than wishy washy. Make sure to be as specific as possible so your friend doesn’t try to weasel out of paying you again.
The key with reminding your friends they owe you money is to be polite about it. Your friends are college students themselves so, more than likely, they can relate in asking for money back. Chances are, they just forgot and need a little reminder.
If you owed money , and the borrower shows no signs of repaying it, one of the first steps you should take is to send a demand letter for money owed.
This is a formal letter that clearly states the circumstances for the loan, the required repayment and a suggestion that taking the issue to court may be an option if the debt is not repaid.
The letter will demonstrate to the borrower you are serious about wanting your money and it will also serve as evidence if the case needs to go to court.
This letter could be the first step in the legal process of recovering debt. In many cases, especially between friends, a demand letter for money owed is all it takes to remind the borrower that they need to pay their debts.
Demand letters should be polite and not harass the debtor especially if it is going to a family member or friend of the lender.
They will most probably need to maintain a friendly relationship with the borrower. This is why the letter should simply state the facts and not have an emotional tone.
- My Friend Owes Me Money And Won’t Pay!
- Ways To Ask Your Friend To Pay Back The Money They Owe You
- I Loaned My Friend Money. What Can I Do To Get My Money Back?
If the case needs to go to court, any harassment on the part of you will not be viewed favorably. The letter can be firm, but polite with no angry expressions or insults aimed at the borrower.
These could act as a deterrent for the borrower to repay the loan. The appearance of the letter ought to be formal but personal and not resemble an official document in any way. If you have personal stationery, that should be used.
The letter should be sent by registered mail, so you have proof of sending and receiving. It could also be sent by fax if there is a confirmation of receipt.
These receipts should be kept. Copies of any contracts, letters of agreement, receipts or invoices that are connected to the loan should be attached to the demand letter.
A clear description of the situation should be stated in the beginning of the letter. Next the letter should state exactly what the borrower wants.
If the letter is to get a loan repaid, you should state a specific amount of money and give a reasonable due date when they expect the amount to be paid.
At this point, it can be stated that if the demands aren’t met, you will take the next step and go to court.
Demand Letter For Money Owed From A Friend
Dear Friends’ Name,
This letter is in regards to a loan that I made to you in the amount of [AMOUNT] on [DATE] for the down payment of your new car. At that time, we agreed that this loan was to be paid in full by [DATE].
As of today, [DATE], you have not given me any payments towards this loan. It has been one year since the loan was to be repaid in full. I request that, on the receipt of this letter, you repay the amount in full.
If I do not receive payment in full before the end of this year, I reserve the right to take further legal action to recover the amount of the loan without further notice to you. This letter may be given in evidence in court of your failure to pay.
If it becomes necessary to go to court, I will expect you to pay the applicable interest, filing and attorney’s fees, and any other related costs. I will be happy to answer any questions you may have if you call me at [555-1234].
Your immediate attention to this matter will be appreciated.
List any attachments
How many times have you lent a friend some cash for lunch or a movie only to never see it again? One of you—if not both—forgot and now it feels a little awkward to broach the subject. Here’s how to get paid back easily and how you can prevent this problem in the future.
Money between friends is often awkward, especially if you aren’t close. Close friends have the option of just paying a little extra around the edges and assuming it’ll work out in the end. That said, not every friend is close. Chances are you don’t see all of your friends every week so if you don’t get paid back right away, your next chance could be several weeks away. When you’ve lent someone $5 for a sandwich it seems silly to bring it up again so long after the event, but those five dollar bills can add up to a lot if you’re always letting it slide. So how can you solve this problem? You have a couple of simple options.
Let Them Get the Next One
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Keeping an exact account of who paid for what is ridiculous, but remembering who paid last makes for a better, more manageable system. That way if you paid for the last film, lunch, or whatever, you can just invite them out for the same thing and say the following:
I got the last one, so do you want to grab this one?
If the other person doesn’t remember, you might have an awkward moment ahead of you in which you have to explain the circumstances, but if you start a trend of trading payments it will become the norm after a few outings.
When friends borrow small amounts of money from friends, the problem is generally a product of our times: few people carry much cash with them anymore because we don’t need cash to buy things by ourselves. We can even split checks across multiple credit cards at a restaurant, so why carry cash with you? If you’re robbed, you lose it. Your credit cards, on the other hand, have theft protection. They’re just a safer option than a wad of bills. Nonetheless, this poses a problem when you have to split payment when it isn’t possible, or you’re at a cash only restaurant, or you bought movie tickets in advance—the list goes on and on. You can solve this problem easily with your smartphone and a service called Square .
You may have heard of Square or seen it before, but if not here’s the gist. You plug in their free or purchase-able ) little credit card reader into your smartphone’s headphone port, download their app, and you can start accepting credit card payments from anybody. When you accept payments with the reader, Square will take a 2.75% cut regardless of the amount. You can also enter card numbers manually, but then they’ll take 3.5% plus 15 cents. Either way, the obvious downside is that you have to pay a fee but the convenience can be worth it when cash isn’t an option. On a $10 repayment, you’re giving up a little less than 28 cents so it’s a pretty insignificant convenience charge. The card reader is tiny so you can take it with you, making it a good way to prevent the problem of your friend owing you money in the first place.
What You Said
I posed this dilemma on a few social media sites and the majority of you agreed that the “get the next one” method is the simplest course of action. Anamari suggested a slight alternative, as putting them on the spot to pay extra could be problematic:
I wouldn’t put someone on the spot by saying “you’re paying, right?” or “you’ve got this one” without fair warning. After all, they might be short on cash in that moment, too, and simply hadn’t remembered the last time. If it’s really important to get evened up, I’d say something at the time of setting up the date, either very directly or along the lines of “I’m tight for cash this week, can you get me this time? Last time it was me.”
I’d argue that in most cases you’re not really putting them on the spot when you’re dealing with insignificant amounts like $5-10. If they can afford that amount for themselves, coming up with double shouldn’t be an issue. Nonetheless, if you want to take a more sensitive approach you can always ask them before you go out so nobody finds themselves in an awkward position when it comes time to pay.
So are there any ways to ask for the money you lent without sounding rude or making the situation awkward? Of course
Politeness ais key, no matter how you bring the topic up
We often lend out money to friends and family – some do it with no second thoughts and some do it with serious considerations. Either way, it is essential that we know where we are putting our money. And to lend money to someone who just doesn’t return it, someone who you trusted will return it to you is oh-so-frustrating. Especially when you are in dire need and the other person is still flaking out. But hey, you don’t want to seem impolite either, right?
So are there any ways to ask for the money you lent without sounding rude or making the situation awkward? Of course, there are. Here are a few things you can say to someone to remind them that they owe you money.
You can ask them what use they have put the money to
This is obviously going to remind them that they owe you money, and in case it genuinely simply skipped their mind, the best case scenario will be that they return it right then and there. If not that the conversation can go in a way where they will tell you when they can give it back.
Ask them to cover for you someplace
You guys go for outings right? So maybe you can ask them to cover for you or get the next round and cover with the money that they owe you. Make sure you aren’t aggressive about it though, make it a request.
Give them a polite reminder
Chances are a polite reminder will work and if you bring it up in a friendly way, no questions or awkwardness is going to spring up. Therefore, you can choose to simply ask, remind and go about it. And if the person asks for more time, you can offer them the flexibility to pay you back in bits.
When a friend or family member is facing financial difficulty, your first response might be to help by lending money. But what should you do if you never get the money back? When you’ve known someone for a long time, this can be an awkward situation.
The Cheat Sheet reached out to personal finance expert Andrea Woroch for tips on how to navigate this tricky situation.
The Cheat Sheet: What’s the best way to ask a friend or family member to repay a loan?
Andrea Woroch: Lending money to family and friends can put you in a sticky situation if you’re having trouble getting it back. Considering that people rarely carry cash, it’s important to make it as easy as possible for your friend or family member to pay you back. So rather than having them try to find an ATM or mail a check, use a money transfer app instead. For instance, Zelle makes it fast, safe, and easy to send money from one bank account in the U.S. to another, typically within minutes when both parties are enrolled. And, you can send a request to your loved one directly and they can pay you back directly in that moment from their mobile phone. This also takes the awkwardness out of sending a text or making a call.
CS: Why don’t people repay loans to friends and family?
AW: People may not feel a sense of urgency to pay their family and friends back because they figure they have time, especially if they don’t have a check or cash handy at the time. You may feel the pressure to go out of your way to pay someone back you don’t know very well to maintain your rapport with them. But with friends and family you may feel comfortable and not rushed. However, this can cause someone to simply forget!
CS: What are some do’s and don’ts when it comes to requesting your money back?
- Do verify contact information. Check information before sending or requesting money when using a money transfer app. A friend or family member may have changed their mobile phone number or email address.
- Do make it easy on the person. Stop by his or her home to pick up cash or a check or provide your P2P payment details if that makes it simpler for the person to pay you back.
- Do be creative. Depending on what your friend or family member owes you, ask him or her to cover you when you are out together for a meal and simply suggest they pay the portion they owe you. This way it’s casual and doesn’t put someone on the spot to come up with cash or a check.
- Don’t let too much time linger. Try to get the money back as soon as possible. Otherwise, the IOU can put a strain on a relationship and friends or family may forget, making you feel more awkward to ask. Ultimately, you should never feel bad to ask someone to pay you back. It’s money that is owed to you that you loaned out of good will with the intention of being paid back.
- Don’t assume the person is ignoring you. People get busy and if someone forgets to pay you back, don’t be on the attack right away. Give him or her a chance and call to politely ask for that money to be paid back.
You lent money to a friend or family member and they haven’t paid you back. Since you thought this was a short-term arrangement — and definitely not a gift — you feel like it’s time to ask for repayment, but you’re stressed about it.
This is a person you care about, so you don’t want to strain your relationship. However, you need your money back, so you’re willing to initiate this uncomfortable conversation, but you want to do it the right way.
“On many occasions the way we ask for the money to be paid back can be truly detrimental,” said Maryanne Parker, founder of Manor of Manners etiquette consulting.
She said the best way to ask depends on your relationship with the other person, the amount of money owed and the situation.
“If you are lending money to your brother or a sister, you definitely won’t feel uncomfortable asking for the money back — especially if it is an ongoing family situation,” she said. “If we are lending money to someone else, then we can use different techniques without ruining the relationships.”
Having proper communication from the beginning is a must, Parker said. This includes making it clear you’re lending them the money — not giving it to them — and want to be repaid within a specific timeframe.
“On some occasions people get confused or misunderstand the situation — especially if there is known ‘financial superiority,’ when one of the parties is doing better financially because [they have] a better job, career, business and so on,” she said.
She said it’s also important to be understanding because it’s possible the other person is very aware they owe you money but is in a difficult financial situation.
“They might even feel much more uncomfortable than us, just because they are in need,” she said. “Owing money to someone puts us in a very vulnerable situation and if we want to keep the relationships going, we should be understanding.”
If you haven’t already set dates for repayment — or they’ve come and gone — Parker recommended being flexible with your repayment request.
“Give them an option to repay the money in installments, be specific and negotiate dates in a friendly manner,” she said.
While a popular practice, she advised against putting repayment terms in writing, unless the person owes you a substantial amount of money.
“I do not believe that putting request for money to be repaid in writing will be beneficial for the relationships,” she said. “For smaller amounts, putting the request in writing might be seen as unnecessary, uncomfortable and petty — especially if the person is a close friend.
However, she said it’s acceptable to do so if the other person insists, as this allows them to show their genuine desire to pay the money back.
When initiating the repayment conversation, Parker said it’s best to be direct. However, since this is a person you care about, she said it’s also wise to assure them you value your relationship.
“Let them know that you need to pay the mortgage or it is your parents’ anniversary and you will need the money soon,” she said.
Parker said to ask if a specific repayment date works for them. If possible, she recommended trying to come up with a creative solution. For example, you might give them the option to pay the first half of their debt by the first of the month and contribute the rest in some other way.
“Perhaps cooking some of the meals for a family celebration or purchasing the cake and the beverages,” she said. “Again, it depends on the relationships, the amount and the situation.”
No matter what, she said behaving in a demanding, condescending or aggressive manner will definitely ruin your relationship. Conversely, being kind, but firm, will allow you to strike a balance that ensures the other person doesn’t take advantage of you.
More From GOBankingRates
Money Manners is a series that explores everyday money situations we encounter in our relationships, at work, and at home along with practical tips on how to handle them
The first rule of loaning money to friends is often: don’t do it. But that’s what friends (and family) are for, right? When a friend asks for money, it can be hard to say no. Whether it’s covering the bill for lunch or helping out with a down payment for a new home, it’s gratifying when we’re able to help.
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However, loaning a friend money comes with the risk of not getting repaid. In fact, a survey by PayPal found that a third of U.S. adults say friends and family owe them at least $450.
There might be an unspoken understanding that your loan will be repaid as soon as possible, but that can lead to a wild mismatch in expectations between the lender and recipient. For larger sums of money, this often leads to serious tension. Here are some tips that will improve your money manners and make sure you get paid back without ruining a relationship:
Establish clear expectations.
If you did not take the time to discuss a repayment deadline, you shouldn’t threaten mafia involvement. Give your friend the benefit of the doubt that paying you back simply slipped his mind or that you had a different expectation about timing for the repayment.
Use this opportunity to get on the same page and agree to a repayment schedule. Maybe you’ll get your repayment right then and there.
If the overdue balance is more than your friend can handle at one time, she probably views the debt as insurmountable. Let her know that you are sympathetic to her situation, but you still expect to get your money back. Start to discuss a payment plan that works for both of you. Invite her to set it up and share it with you first. If she fails to do so, come up with your own schedule and let her know you’ll follow up every time payment is due.
Let tech do the talking.
Use apps like Chime, Square Cash , or Venmo to request money transfers. Your friend will need to approve the request before you get paid, but it’s another good (and polite) reminder that you’re waiting for reimbursement. This method also makes getting paid easier so you can avoid the “check is in the mail … oh, it must have gotten lost” saga.
Time the ask.
For small amounts of money owed by a friend, consider a more casual opportunity to square up. The next time you’re out together and the bill shows up feel free to say, “Since I covered dinner last time, want to get this so we can call it even?” If your friend cannot cover the entire amount owed at that moment (be understanding she may be on a tight budget), ask her to pitch in for what she can afford.
Respectfully decline covering your friend in the future.
Depending on how serious the situation is (a couple bucks to cover lunch is very different than thousands of dollars) you may need to say no to lending money in any amount to your friend in the future. You have every right to make that determination for yourself. Keep in mind debt can cause major stress on your friendship. Refusing to put either of you in that situation is the best way to avoid it.
The bottom line.
Even after all this, your friend may never pay you back. In that case, you have to decide if you can get over it and move on, or if the debt is too much to forgive. If it turns out to be the latter, let your friend know you don’t feel comfortable continuing with your friendship because of the way they are treating you. If anything, it will be your last ditch effort to encourage your friend to do the right thing.
What to do if you owe someone money.
It happens! (Remember the statistic at the beginning of this post?) But it’s never too late to correct a mistake. Be proactive and let the person you owe money to know that you haven’t forgotten about the debt via a transfer money app. Then, create a payment plan and explain what the steps you will take to make it right. In the future, if you can’t afford something, politely decline and know there will be many more opportunities. And always remember that friends are friends, not banks.
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.
As the quote from Hamlet goes, “Neither a borrower nor a lender be, for loan oft loses both itself and friend” – if you borrow from or lend to friends, not only do you lose the friendship, you also lose the loan. It’s tricky to get into complicated financial arrangements with friends. However, it’s not always possible to turn down a friend in need.
While you are lending, you must make sure that you are not compromising on your necessities and are offering only what’s in your capacities. Your investments, EMIs, regular expenses, and contingency fund must not get affected. Don’t be shy about falling short of your friend’s expectations. You need to be on a finically firm footing yourself before you can start lending money. But what if you’ve lent the money-your hard-earned money-and your fried has been negligent in repayment?
Here’s an escalation matrix: a step-by-step way to put the onus on your friend to return your money, beginning with some easy steps and ending with some hard steps.
Barter against your money
You can give your friend the option of keeping something valuable with you in exchange for the money he borrowed. You can ask for something you require, such as a TV, car or bike etc. Evaluate the value of the items before adjusting to the due amount. If your need for the money is especially pressing, you could ask the friend to consider selling an asset.
Use legal ways
Legal remedy should be the last option to get your money back. Get written legal documents, witnesses, call records and other proofs in place with you to present your case. It’s best to make the payment by cheque. However, legal proceedings might take time and they come with additional expenses to be made to advocate. So go for it only if it’s a big amount.
The best way to go about lending a friend is to ensure he has a repayment plan at the time of lending. Always ask for post-dated cheques for repayment of your money. You can also form a registered lending agreement as a document of your transaction, with witnesses such as members of the family from both parties.
Before taking any harsh action against your friend, make sure the amount you are fighting for is worth the effort and the friendship you would lose.
Suggest alternative ways
Talk to your friend and understand what’s stopping him from the repayment. If he is in a difficult situation, give him the option of repayment in instalments. Give a monthly timeline to return the borrowed fund slowly. Help the friend form a budget or an investment plan to raise the money. You can also send gentle reminders to make payments on time in case he misses it. Forcing an immediate payment might cost you your friendship, so be empathetic in your approach.
Show your urgency
If the previous option fails, you can tell your friend that you need the money on an urgent basis. Instead of calling him, you might want to go visit him and explain why any delay in repayment could cause you trouble and land you in financial crisis. If it helps, you can carry supporting documents to help your friend understand your urgency better.
Involve common friends and family
At this point, if your friend avoids meeting you, you should inform your family and common friends about it. Show any proof of lending to your common friends, and involve them in getting yourself out of the situation. Frequent messages, calls and visits are one way of conveying the message that you are not going to give up on the money.
When you loan people your money, especially family and friends, they can let you down by not paying back their debt and, often, completely avoiding you as a consequence. In this article, we give you tips on how to deal with the situation.
Having everything on record
Before you lend money to your family member or friend, create a contract or promissory note. The contract or promissory note should specify the amount borrowed, any agreed interest you will be charging and the repayment terms. That way you’ll know where you stand and if your family member or friend ever refuses to pay you back, you have a legally binding document to use as evidence.
Always keep a record – from SMSes, WhatsApp conversations, telephone recordings, payment agreements, email conversations and letters of demands because people are not always trustworthy, and this will also help you when you decide to take the legal route.
Also, try to transfer the money electronically so that you have evidence should the person refuse to repay you.
Asking for the money
If the person who owes you money is late on a payment, first remind them politely and ensure that your request is in writing, either by email, SMSes, WhatsApp conversations or in a written letter. Although you may be irritated or angry, it always helps to be polite and respectful in your tone and manner so that you don’t upset them. Perhaps your debtor has a legitimate reason for not paying you back and it will help both parties if you can get to the bottom of this.
If none of these strategies work, then it might be time to approach the Small Claims Court or use a professional debt collector.
Small Claims Court
Small Claims Court offers a quicker and easier way of resolving certain civil disputes. You do not need a lawyer to represent you at a small claims court. All official languages may be used and if you are a minor (i.e. under 18) you will need to be represented by an adult.
- Contact the person whom you have a dispute with in person, in writing or telephonically and ask them to settle your claim (the current limit is R20 000).
- If the person who owes you money refuses to pay, they should then be sent a letter of demand which indicates all the facts and the specific amount you are claiming. The letter must be delivered in person or by registered mail (the Post Office can assist). Once the person receives the letter, they are given 14 days within which to settle your claim.
- If the person owing your money has not paid the claim in 14 days, go to the small claims court at your nearest Magistrate’s Court with:
- a copy of the letter of demand.
- any contract or agreement between you and the person which proves the claim.
- a post slip or any other document which proves that the letter of demand was handed to the person.
- The person’s personal and contact details.
The clerk of the court will prepare a summons which will force the person to come to court at the set date. The summons can be delivered by you or the sheriff of the court. Please always remember the date and time when your case will be heard and be there to state your case.
- On the day of the court hearing, you must bring proof that the summons was delivered to the person you are claiming from. The court procedure is informal and not complicated. You will be expected to tell your story and answer questions from the commissioner of the Small Claims Court.
- If judgment is given in your favour, the person must pay the money immediately and will be issued a receipt. When/if they are not able to pay, the court will investigate their financial position and determine a payment plan.
- If the person does not settle the dispute as agreed, the matter will be referred to the magistrate’s court, for execution processes.
For more information you can contact your nearest magistrate’s court.
Professional debt collector
If going to court is going to be too much of a hassle, you can request a debt collection agency to collect the money on your behalf. Getting a professional debt collector on board increases your odds of getting paid, mostly because they’re more persistent than you would be. Debt collectors also have tools that you don’t have at your disposal, like third-party sources that give them access to information about the person who owes you money.
The disadvantages of using debt collection agencies is that you’re charged a fee and they can charge up to 50% of payment for their services.
The views expressed in this article do not constitute legal advice and is merely for informational purposes.
By FindLaw Staff | Reviewed by Bridget Molitor, J.D. | Last updated July 13, 2021
Yes, you can sue someone who owes you money. When someone keeps “forgetting” to pay you or flat out refuses to pay up, the situation can quickly become frustrating.
You can take the issue to a small claims court and pursue legal action if it meets the minimum and maximum money thresholds.
Money Threshold for Small Claims Court
Check your state’sВ small claims caseВ money limit first before considering legal action. You can search for the terms “[your state] money owe small claims court” or “[your state] money claims conciliation court.” Look for a .gov website with an answer, or call a small claims court attorney with questions.
For example,В Oregon small claims courtsВ allow any case up to $750. Cases requesting $750 to $10,000 can go to small claims or civil court. Any cases recovering over $10,000 need to go to civil court or a local superior court.
Small Claims Judgment 101
Small claims court exists to give two or more parties a place to state their side of the story. However, you should carefully consider ifВ suing someone is the right course of action.
You will prepare your case, file a complaint, and then a judge will hear the case and provide a final ruling based on the evidence you present. The cases and resolutions tend to be quick, and both sides must obey the judge’s decision.
While you can usually bring an attorney to some small claims court, many people choose to represent themselves to save money. Some states don’t allow you to have an attorney at all.
Note: If the money owed is due to rent, housing, or pending eviction, you should know those laws in your state. Debt involving real estate, eviction, personal injury, security deposits, unfilled contracts, and otherВ small claims lawsuitsВ may have specific rules in state courts.
Owing Money: Legal Definition
There are some guidelines you need to follow toВ sue someone for owed money. You obviously can’t gift someone money and one day decide you want it back. You also can’t loan someone money but never tell them you expect to be paid back.
In the legal sense, owing money must include:
- Clear expectations this is a loan
- Both sides understand there is a legal duty to pay the money back
- A date when the payment, payment plan, or payment installment is payable
- The payment date has arrived or passed
- Some physical or digital record of the money owed or given
Typically, it is a good idea toВ create a contractВ for money loaned, money owed, or any personal property you lend. Other ways to show evidence can include emails, texts, money transfer receipts, bank account transfer history, etc.
It can be hard to prove your case if you verbally discussed a loan, gave them cash, and have no record of discussing paying the money back.
Suing Someone for Loans or Debts 101
To show your case in the best possible light, it is a good idea to try otherВ methods of debt collectionВ first. Be sure to ask for the money вЂ” preferably in writing вЂ” so there is a record of your attempts. This is called a “demand letter.”
Even if the debtor doesn’t answer you, you should ask them multiple times for the exact dollar amount they owe. It is a good idea to tell them you will pursue legal action as a next step.
You can also consider professional collection agency services that work to retrieve personal loans. If other debt collection methods have failed, you need to follow steps toВ take the matter to small claims court. You can also considerВ mediationВ instead of court (many small claims courts will send you through mediation first).
This is also the time to consider if youВ want an attorney at your side in small claims court. Not hiring one can keep costs low, but the case may take longer, and you could possibly have a better outcome with professional representation. An attorney is also a good idea if the debt is too large for small claims court and you need to file in district court. Depending on your circumstances and the type of case, you may be able to have legal aid provided free of charge.
Step 1: Filing Your Complaint and Paying Filing Fees
First, check the thresholds for the amount of money you are requesting and the correct court to file in. If the amount is too small or too large, you won’t be able to file in small claims court.
File a complaintВ with your county and pay attention to the forms and documentation the case requires. You will need to pay some court costs вЂ” typically under $100 вЂ” toВ file the paperwork.
Step 2: Serving the Lawsuit and Court Dates
The fee you paid may go toward a court official “serving” the case. This means they will find the person who owes money (the “defendant”) and give them official notice that they are being sued by you (the “litigant”). You might also be able to serve the defendant yourself through certified mail.
During this phase, you should gather evidence, practice speaking about your case, and prepare yourself for court.
Note:В If the person you wish to sueВ filed for bankruptcy, their bankruptcy will trump your case. The “automatic stay” in bankruptcy stops anyone from collecting debt, evenВ lawsuit debt. You may have options to collect the money when their case is decided. The bankruptcy judge may also rule that they must pay you back.
Step 3: Attend Court Hearing
Be on time for your court date. You can expect theВ court hearingВ to be quick вЂ” typically around 15 minutes total. If you are nervous about what goes on during a hearing, you can sit in on small claims court cases in advance.
You will need to show your documents and provide evidence that the other person owes you money and has ignored or refused to pay you. Answer all questions and be polite.
Step 4: Final Ruling and Collecting Debt
If the other person doesn’t show up to court, there will be a “default judgment” in your favor. The judge can rule that the person must pay. However, this doesn’t mean they will automatically pay you.
You still need to collect the money by:
- Getting aВ lien on their propertyВ until they pay you
- Wage garnishmentsВ via court order
- Following any judgment the judge determines
You canВ have an attorney help youВ through the whole process or step in at the end to enforce getting your money. Even after a good outcome in small claims court, getting a debtor to pay can still be drawn-out and complicated.
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Closed 5 years ago .
I borrowed 500.00 from a friend, several years ago, and want to repay him. Although the subject hasn’t come up, it has always bothered me. What kind of interest should I apply to this personal loan?
80-100 value and give it together with the money. This avoids the awkward thing of paying more than borrowed without request (he could e.g. not accept it, making you feel bad because you know it’s unfair) and giving exactly the value (which gives no feedback that your friendship is precious).
4 Answers 4
If you didn’t expressly discuss terms I would recommend a gift in lieu of interest. Lending between friends can be complicated and change relationships unexpectedly.
Some people are offended by the idea of interest paid between friends. A gift acknowledges the benefit you’ve received, but doesn’t monetize your friendship.
What kind of interest did the two of you agree upon when you borrowed the money?
If you didn’t discuss this in advance, what kind of interest do the two of you now agree would be fair?
If your friend is now insisting that interest isn’t needed, but you feel you owe something, you will have to decide for yourself what kind of gift would appropriately express your gratitude.
So if you haven’t discussed in advance and if it’s your decision to decide the interest now then I think the fair deal would be count yearly compound interest as per the current interest rate with which banks in your company provide personal loans.
I think in your individual situation, as I have the same issues to look at soon myself, is, how did you leave the situation last when he handed you over the money?
For example; did you promise to repay the loan with interest included, or did you quite simply promise to just ear-mark it in your memory, for when he will ask you for a favor?
If he is expecting interest, I’d pay somewhere between 10 to 20% but remember, if he’s a real friend and no interest was discussed, then I’d; a) Return the borrowed funds with a gift of his liking; wrapped and with a “Thank you” card (you can buy Thank you cards from any good card shop), plus, b) I’d make sure you remember it, for when he needs help and don’t necessarily wait for his asking, either. When he’s noticeably in a predicament of his own kind, offer him sincere help, but be sincere about it and not like; “I gotta do this guy a chore, cos’ he helped me once before”, cos’ if he senses that kinda attitude from you, he might reply, “Look mate, if you don’t want to really share your damn time with me, then just take a friggin’ hike, somewhere else, Pal”.
Something else to take note of, he might want to take challenge to this his own issues alone, for the betterment of his own self confidence, an issue we tackle with till the day we die, but there again, never assume that, cos’ we all want help from time to time. Remember, it’s his issue and he probably only wants loving hands on it, or a mind of enthusiasm on it, plus, when he lent the money, if he wasn’t bothered about the interest and he’s sincere, which if he didn’t want anything back for it, then he probably is, I’d be humble and associate with him, on a level playing field in future because friendships come few and far between, of that particular breed, anyhow.
Same again, if he agreed to interest because, he might be a sincere and caring person, but just wants to make sure that you, (his friend), will respect his money, so you don’t piss the relationship up the wall, because no relationship is ever perfect (in whole, nor in part), thus, appreciate the fact he’s not slapping the full interest rates like any loan shark would, thus again, repay him with the interest (only as, previously agreed), with a small “Thank you” card. After all, it wasn’t his obligation to lend you the money (he’s a tradesman or whatever he does, not your personal bank manager and yet again, you asked him as a friend, so if he treated you more leniently than a customer, then that’s an act of kindness in itself, after all, albeit, he might even be your dad.
If this discussion was over £10, I’d pay him back as previously agreed and invite him to a pint, at your local pub.
by Stephen Michael White
November 26, 2019
- Collecting Rent
When tenants don’t pay rent on time, you are put into a difficult situation. Landlords need to take swift action to ensure that their business doesn’t suffer due to late payments, but not all landlords will be ready to move straight to eviction.
Landlords like you should always have a good grasp on what can be done to get your rent as quickly as possible. Waiting too long to get paid can be devastating, so you should always have a plan of action ready to go.
Landlords dealing with tenants that are late for the first time may want to find creative ways to ask for your rent payment before thinking about eviction. Often, the right kind of reminder can change the future of rent payments from a tenant.
Today, we’ll introduce five creative ways to ask for your rent (and what to do when those methods fail).
A Table Of Contents On How To Ask For Rent Money Nicely
- Five Creative Ways To Ask For Your Rent Payment
- What To Do When All Else Fails?
- Don’t Wait Too Long To Get Paid
Five Creative Ways To Ask For Your Rent Payment
1. Offer An Alternative Payment Method
Making it easier for the tenant to pay, even if it might cost you a little bit more, is a great way to encourage a tenant to pay as quickly as possible. If your tenants usually pay via check or money order, you might want to offer Venmo, PayPal, or Zelle as an alternative.
These free services can be used easily, but they may have associated fees. Check into each of these services to see if any of them can work for you and your tenant. Not all tenants will find these to be an easier option, but some will be able to get the payment to you more quickly if they can use these methods.
2. Set Up A New Collection Date (And Stick To It)
If you know that your tenant is struggling to pull their rent payment together this month but it is the first time they are late, you may want to ease their burden by asking for it in a kind way.
Rather than asking the tenant for the money ASAP, set up a new rent due date that is a few days out. Let them know that you will expect the payment by that date, but you understand that they are a bit delayed.
Though you should expect future payments to be on time, asking tenants in this gentle way to pay their rent by a specific late date is a good way to remind tenants that you are waiting and aware, but that you are willing to be understanding for this one month.
3. Sit-Down Conversation
Has the tenant been late for rent for more than one month in a row? If that’s the case, you may want to take a different approach to ask for the payment. Rather than just calling them or sending a message that requests payment immediately, ask if you can sit down with the tenant.
If open to this conversation, ask the tenant some questions:
- Are they doing okay?
- Why is their rent late?
- Is the rent due date the problem?
- Do they anticipate this problem continuing?
By engaging in an open conversation with tenants that owe rent, you will be able to let them know that you are waiting for payment. At the same time, you and the tenant will have an opportunity to find a solution to their rent problems without having to turn to eviction.
4. Set Up Rental Payment Reminders
If you’re having a regular rent payment issue and are tired of struggling to figure out how to ask for rent money nicely, you might want to try a different approach. The most polite way to ask for payment is to ask before anyone is late!
When you send a reminder a few days before the rent is due, you can be very polite. Sending a reminder about an upcoming payment rather than a request for a late payment is always going to be a more welcome message.
Ask your tenant if they are willing to be included in this type of reminder when they sign their lease or when you implement it. You don’t want to send out this type of reminder unless they are open to it.
5. Offer A Prompt Payment Discount
Ask the tenant in question if they would be willing to set up an automatic payment method for future rental payments. If so, offer a small discount for this setup. The setup prevents late payments and rewards tenants for being more responsible about their payments.
What To Do When All Else Fails?
If none of these alternative methods for collecting rent payments work out for you, you need to quickly and efficiently move to file for an eviction.
Let’s say that rent is due on the 1st of the month. With a five-day grace period (or the applicable grace period in your area), you should be sending out a certified eviction notice on the 6th if payment has not been received. Once the required amount of time has passed, full eviction filings should occur ASAP.
While it’s okay to give tenants a few extra days to get their rent together, remember that the later they pay one month, the more likely they are to be late the next month. It’s important to always balance out being understanding with keeping your position as a landlord strong.
Evicting a tenant for non-payment can be a stressful process, but it is more stressful to not be paid for long periods of time due to unreliable tenants.
Don’t Wait Too Long To Get Paid
While you figure out how to ask a tenant for rent, remember not to wait too long. Time is of the essence. Whether you are going to ask them for it nicely or simply move into eviction proceedings, making sure and swift decisions is necessary. Be confident in your skills as a landlord, and you will succeed!
Finally, remember that the best way to avoid needing to deal with these rent payment issues altogether is to spend more time screening tenants and being sure that you choose more reliable options. The best tenants will keep up with their payment schedule, and that’s what you want to find.
Nobody Does Tenant Screening Like We Do.
Our tenant screening services have been trusted by over 90,000 landlords & property managers since 2007.
Published: 07:23 BST, 14 February 2017 | Updated: 07:45 BST, 14 February 2017
During the year I was with my ex, he bought me a lot of gifts and transferred me around £7,000 as a gift.
We made no written or oral contract to say the money or gifts would be paid back at any point, but then when we did split up he started asking me to pay him back.
I have now found out he kept the receipts for everything he bought me even cinema tickets and a chocolate bar and he has been texting me for months saying I owe him more than £20,000.
Am I legally obliged to pay this money back to him? He has told me if I don’t he will tell my parents and due to my religion this would put me in a very difficult situation, via email
My ex says he will tell my parents about our relationship if I don’t pay for gifts he bought me
Rebecca Rutt, of This is Money, replies: We are often contacted by readers who have been given money from an ex partner which they believed was a gift who have then run into problems when the partner asks for it to be repaid.
This is a common problem as generally when two people are in a relationship and money is exchanged, it’s assumed it won’t cause any issues – either because it’s given as a gift or because it’s given as a loan to be paid back.
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More often than not, money is exchanged without a written or oral contract and it can be extremely time consuming and stressful to arrange for this to be paid back, especially if the relationship has turned sour.
In your case you were given several gifts by your ex partner, which you did not think you would have to repay. You were also given cash and you believe this was also given as a gift and not a loan.
There were no agreements written, or talked about, at the time which would lead you to think you would need to pay the money back. However, now you have broken up with your partner, he is asking that you pay back the money and gifts, which he says is more than £20,000.
We got in touch with a legal expert to find out where you stand.
Gary Rycroft, partner at Joseph A. Jones & Co, replies: ‘The legal definition of a gift is “the voluntary transfer of property from one individual to another made gratuitously to the recipient”.
‘The individual who makes the gift, in this case your ex-partner, is known as the ‘Donor’ and the individual to whom the gift is made is called the ‘Donee’.
‘The word ‘gratuitously’ means that the ‘Donor’ of the gift must be happy at the date they made the gift that they made it without receiving anything in return.
‘In your case you would say all the gifts that you received were made on that basis.
‘Your former boyfriend however may now say that he was expecting to receive something in return.
‘He must make his case in that regard but your reply to that would be that whilst you were together he was receiving your love and affection and it is on that basis he was happy to make a gift to you gratuitously.
‘In the absence of any written or oral agreement, no court in the land would entertain a claim by your former boyfriend for him to be repaid with regard to the gifts which he made to you.
‘It is perfectly normal for a boyfriend to give gifts to his girlfriend and the law would not support a former boyfriend seeking monetary compensation for those gifts after the relationship has ended.
My ex lent my £7,000 as a gift when we were together but is now asking I pay him back
‘The monies which your former boyfriend transferred into your account of £6,950 may also be considered a gift from him to you unless there is any evidence to the contrary.
‘Whilst it is extraordinary for a person to give another person a consumable item, such as a chocolate bar, and then later ask for the cost to be repaid, clearly it is more common for an individual to transfer cash which is then considered to be a loan.
‘However, cash can also be transferred as a gift and so for a person to claim that the cash was a loan there still needs to be evidence to that effect.
‘Unless it was agreed between you that the money was transferred as a loan and there is some evidence to that effect then your former boyfriend would not be successful in bringing a claim against you for the money to be repaid.
ASK AN EXPERT
‘My advice is for you to write back to your former boyfriend to say there is no evidence that any of the items or cash which he transferred to you were done so on any basis other than them being absolute gifts and that he had no claim for repayment.
‘Also ask him to stop contacting you and tell him if he continues to contact you then it amounts to a potential criminal offence of harassment.
‘The legal definition of harassment is “the act of systematic and/or continued, unwanted and annoying actions of one party or a group including threats or demands”.
‘It is a specific offence under the Administration of Justice Act 1970 to harass a person with demands for a payment that are calculated to subject that person to alarm, distress or humiliation.
Where do I stand legally now my ex is asking me to pay him back for gifts he gave me?
‘It would be worth pointing out to your former boyfriend that if he continues to threaten you with telling your parents about the situation then you could report him to the police for harassment. Clearly, it would not cost you anything to make a report to the police and hopefully it would resolve the situation promptly.
Rebecca Rutt, of This is Money, replies : As you’ve told us there is no evidence that the money from your ex-partner was a loan, it is a pretty clear case that he will not be able to claim for you to repay it.
This is because without evidence, such a loan agreement or other documentation such as emails, voicemails or texts with details about the loan, there is nothing to back up his claim that the money was a loan.
With regards to your partner threatening you, if you’re in a position where you feel harassed or threatened you should contact the police.
Five tips for preserving your relationship
Asking a friend or a relative to pay you back is way up there on the awkward conversations list (you’ll find it right between having the sex talk with your teenager and asking your parents about their estate). But unless you can afford (literally and emotionally) to write it off and forget about it, the discussion is unavoidable. And if you approach it from the wrong angle, it could potentially ruin your relationship. Here are some tips to getting what you’re owed and maintaining that relationship simultaneous.
According to a 2012 study Lenders’ Blind Trust and Borrowers’ Blind Spots written by Linda Dezső and George Loewenstein and published in the Journal of Economic Psychology, borrowers tend to rewrite history and view loans as a gift instead. That’s good information to have because it allows you to, perhaps, take the fact that they haven’t rounded back a little less personally. Remind your friend that it was a loan, but do so gently. Ric Edelman, author and founder of Edelman Financial Services, advises approaching the conversation like this: “Hey I hate to bring it up but I was wondering when you think you’ll be able to pay me back?”.
Remember the history.
The second reason to follow up with a light touch is the same impulse that caused you to lend the money in the first place. Your friend is or was struggling, that’s why they took the (also difficult) step of asking for a loan and why you decided to actually do it. If you begin guilt tripping them and consequently make them feel bad, you not only create more tension in the relationship but you also tear down their confidence in being able to pay you back says Edelman.
Give a reason.
While you shouldn’t have to explain to your friend why you want your money back, having a specific reason actually helps. “Giving them a reason like ‘I need that money to pay a car bill’ helps them to hustle a little more,” says Priya Malani, founder of financial planning firm Stash Wealth. “They understand that you urgently need that money and that you aren’t just asking for it back to be a jerk,” she continues.
Create a plan and offer help.
“Making a repayment plan is an effective alternative, since someone might not have all the money upfront,” says Edelman. Offering your friend the opportunity to pay in smaller installments is a good compromise — you get paid and they get released from a little debt. (You may even want to set up a system of doing it using a payment app like Venmo so that you can bill them incrementally, they can pay you incrementally, and you don’t have to discuss it again.) Another solution? Offer a different kind of help, like a brainstorming session to come up with additional sources of cash. Helping them find their next solution will help you get your money back quicker advises Malani. “Do some research and offer them alternate solutions like a personal loan, or selling some unused household items on ebay” says Malani. “Providing them with assistance shows your friend that you are trying to help them not [throw a wrench into their financial life].”
You don’t necessarily need to be repaid in cash. “Offering creative solutions like having them pay for dinner, gas in the car or movie tickets on a pay-as-we-go basis,” is another way of getting your loan back says Edelman. Alternatively, perhaps you’d be okay with them working it off. Have kids? Ask them to babysit. Have no time to run out to the grocery store because you are stuck at work? Ask them to pick up a few things. Lawn getting out of control? Ask them to mow it.
Lending money to a family member or friend is a risky proposition, one that could end very badly. You could lose your money and wreck an important relationship.
Remember the advice Polonius gives his son, Laertes, in Shakespeare’s “Hamlet”: “Neither a borrower nor a lender be, for loan oft loses both itself and friend.”
Nearly half (46 percent) of adults who lent money to friends or family reported having a negative outcome, 37 percent said they lost money and 21 percent experienced a damaged relationship with the borrower, according to a recent survey by Bankrate.com.
Cosigning a loan can also cause personal and financial problems. Again, nearly half (45 percent) the people in the Bankrate survey who did this said they experienced a negative consequence:
- 21 percent reported having their relationship damaged.
- 20 percent said their credit score was damaged as a direct result.
- 18 percent reported losing money in the process.
“This data clearly shows that we should not be lending money to family and friends and we should not be cosigning loans because, unfortunately, about half the time something goes wrong,” said Ted Rossman, industry analyst at Bankrate. “While it’s bad enough to lose money, I think it’s worse when a relationship gets hurt, as it does all too often.”
Children often ask their parents to cosign a loan when they can’t get a credit card or car loan on their own. It’s easy to understand why a parent would want to help in this situation, but many don’t realize that consigning is a legal obligation that can come back to bite them.
“It’s a lot more than recommending someone for a loan; it’s a legal promise to repay the debt if the primary borrower does not,” Rossman explained. “Cosigners can lose money and their credit scores can be damaged if payments are not made on time.”
Cosigning can also affect the cosigner’s ability to obtain credit because it typically raises their person’s debt-to-income and credit utilization ratios. So, even if everything goes well, there can be consequences, Rossman told NBC News BETTER.
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Lending money is a financial, not an emotional decision
A request to help a family member or close friend who’s in a bind can really tug at your heartstrings and make you do something you wouldn’t normally do.
If you expect to be repaid and you get stiffed, that sense of betrayal can create a lot of anger.
“It can ruin relationships,” said Bruce McClary, vice president of the National Foundation for Credit Counseling. “People often lend money on good faith and they don’t put things in writing. They don’t sit down and talk about the arrangement and what’s expected. Failing to set expectations and write it down always leads to regret.”
When he was a front-line credit counselor, McClary saw people dip into their retirement savings or borrow money themselves in order to lend to a family member in need.
“That just shows you how powerful the emotional element is and how it can make otherwise rational people do some crazy things with their money,” McClary said. “I’ve seen a lot of bad decisions that aren’t backed up by careful consideration.”
By putting the terms of the loan in writing, this becomes a financial transaction, eliminating the possibility that the borrower might consider this a gift. Just remember, there aren’t many consequences for not repaying you. It’s not going to hurt the borrower’s credit score, like defaulting on a bank loan would do. And chances are you’re not going to sue them.
Personal finance advisors contacted by NBC News BETTER have this advice: If you’re don’t feel comfortable lending that person money, don’t do it. If you agree to do it, consider it to be a gift that won’t be repaid. So, don’t lend more than you can afford to lose.
“Just assume that giving a friend or family member a loan is the equivalent of setting that money on fire,” said certified financial planner Megan Brinsfield, director of financial planning at Motley Fool Wealth Management. “Think of it that harshly, but at the same time, giving someone money and helping them out should bring joy to both parties, so it shouldn’t be done begrudgingly.”
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Lending your credit card is also asking for trouble
The Bankrate survey also shows the potential pitfalls of lending your credit card to a friend or family member. Of those who did this, 37 percent had something bad happen:
- 21 percent lost money
- 16 percent said it harmed their relationship
- 12 percent took a hit to their credit score
Some cardholders don’t actually give their credit card away, they just love to jump in and pay a joint bill — maybe for lunch or the movies — in order to earn credit card rewards. It’s easy to assume the others will contribute their fair share, but don’t count on it.
Of the credit card holders who did this, expecting to be repaid, most (70 percent) said they did not get the money at least once (27 percent said it happened occasional and 23 percent said frequently).
Older millennials (age 30-38) were most likely to be stiffed when paying a group bill, the survey showed. They’re also the most likely to try the “pay the group bill to earn rewards” strategy.
“Even getting stiffed just once, will probably wipe out the value of the rewards you’ll earn and then some,” Bankrate’s Rossman said. “This is a risky strategy, particularly if it leads to credit card debt. If you’re already in credit card debt, then you’re not only subsidizing your friend or family member’s purchase, but you might be paying interest on it, too.”
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- How to create an emergency fund in just 90 days
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Want more tips like these? NBC News BETTER is obsessed with finding easier, healthier and smarter ways to live. Sign up for our newsletter and follow us on Facebook, Twitter and Instagram.
Herb Weisbaum is a contributor to NBC News and writes about consumer-related issues. He can be found on Facebook, Twitter, or The ConsumerMan website.
Last updated on October 22, 2021
In times of difficulty, we naturally turn to family and friends for help. The same holds when those difficulties are financial. Family and friends know you and understand your troubles; they’ll be willing to lend you a hand even when banks won’t. They trust you regardless of your credit score. If you borrow from people close to you, can you pay them back before you file bankruptcy?
Preference Payments to Insiders
When you file for bankruptcy protection, the court wants to round up all your creditors into one place and deal with them all at once. No one is supposed to be left out of the system. That includes your family and friends, if they’re your creditors. Basically, the laws are set up so that you can’t treat one creditor differently than the others. In order to ensure that all your creditors are treated fairly, the court requires you to list all your creditors and debts.
Your parents, siblings, other relatives, and close friends are “insiders” in bankruptcy law. 11 U.S.C. § 101(31). In other words, the court knows that you’re likely to choose to repay them over other creditors. So, they’ll look very carefully at any payments you make to friends and family before filing. Payments to insiders are called preference payments and they’re prohibited by bankruptcy law. If you repaid your friends and family within a year before filing bankruptcy, the court may “avoid,” or reverse, the payment. They can actually claw back money from your relatives.
In fact, preference payments need not be made to friends and family. If you repaid any creditor within 90 days of filing, the court will examine the payment to determine if it qualifies as a preference. Perhaps you were worried about keeping your car and chose to pay it off before filing without making payments to your other creditors. That may be deemed a preference and the money may be clawed back by the bankruptcy trustee.
What payments are safe?
The court isn’t going to claw back every payment you’ve made in the three months before you file. Regular payments, such as your mortgage and car payments, rent payments, and utility payments are allowed. The court is looking for extraordinary payments – ones that you didn’t have to make.
Insiders vs. Non-Insiders
So, the court will look closely at payments made to non-insiders within 90 days of filing. The look-back period for insiders is a full year. Part of the rationale for the longer look-back period for insiders is that they have an edge over other creditors. Given the option, most people will choose to repay a loan from their grandmothers before a loan from a big bank. The court doesn’t care where the loan came from or who the creditor is. In bankruptcy, they should all be treated the same way.
Transfers of Property
In addition to actual cash payments, the court will look at any transfers of property. They don’t want people to transfer property to friends or family in order to hide it from the bankruptcy process. In other words, you can’t give a valuable painting to your cousin before you file in order to avoid having to sell it to repay your creditors.
How to Protect Your Family’s Interest
One common issue with loans from friends and family is the lack of formality of the loan. The court is worried about official creditors. A loan from your parents without an official promissory note isn’t enough – the court will treat that as though your parents gave you a gift. If you want your friends and family to receive payment through the bankruptcy process, you need to have an official document recording the loan amount, the parties to the loan, and the repayment terms. Otherwise the court will leave them out of the bankruptcy process altogether and everything you pay will go to your official creditors.
Of course, the benefit of dealing with friends and family is the familiarity you have with them. If there is no promissory note, you can choose to repay them after the bankruptcy process. If there is a note, they will probably only receive partial payment through the bankruptcy process. Your legal obligation to repay the loan will be discharged at the end of the bankruptcy, but you can always choose to pay the full balance afterward.
If you file under Chapter 7, your bankruptcy process will take only a few months and you’ll be able to start repaying whatever loans you’ve taken from family and friends as soon as it’s over. You can also use income you earn after you file; income earned after filing is not part of the bankruptcy estate. If you file under Chapter 13, the situation is a little more complicated. If the loan from friends or family is documented by a promissory note, you’ll be able to pay it back through your payment plan. However, those payments will be proportional to the size of the debt. If that note represents just 10% of your total debt, only 10% of any given payment will go toward it. You won’t be able to dedicate any more payments to it until the end of your Chapter 13 plan, which will last 3-5 years.
Planning to File
When you’re considering filing bankruptcy, make sure your attorney knows about any payments made to family and friends prior to filing. You’ll also want to disclose any loans you’ve taken out from insiders with official promissory notes. Your attorney can help you determine if the payments will be clawed back or if the court will allow them. If your payments are likely to be considered preferential, you may be better off waiting until those payments are no longer within the look-back period. You should also discuss the loan with the person you borrowed from. You may want to warn them that the payment may be clawed back. The court can sue them for the return of the money, so it’s probably best for you to discuss the issue with them before that happens. You can also work out repayment arrangements for after the bankruptcy, if you choose.
Contact an experienced local bankruptcy attorney to discuss payments to and loans from family and friends before you file to discuss your options for repayment.
To ask for payment professionally, small businesses should always word their payment requests using polite but direct language. Give the client the benefit of the doubt and first ensure they received the invoice in question. Small businesses should follow up briefly by email to request payment and if the client still does not pay the outstanding invoice, the business should speak to the client by phone before considering cutting off future work for the client or taking legal action.
Explore these topics to learn how to ask for payment professionally:
How to Ask for Payment Professionally
To ask for payment professionally from clients with unpaid bills, small businesses should follow these steps:
1. Check the Client Received the Invoice
To request payment professionally, it’s important to first make sure there was no error or miscommunication about the invoice. Send a polite email to your client explaining that the payment is now past due and ask to make sure they received the initial invoice and there were no problems with it.
2. Send a Brief Email Requesting Payment
If you don’t hear back from the client after your first check-in or your client acknowledges that they received the invoice but you still don’t receive prompt payment, follow up with a brief, professional email. Outline the invoice due date and how many days ago it was due. Remind the client of any late fees included in your payment terms and let them know you’ll be charging them for late payment. Remind them of the different ways they can send payment and reattach the original invoice to the email before sending it to the client.
3. Speak to the Client By Phone
It may seem awkward and intimidating, but if your email requests for payment don’t succeed in getting the client to pay your invoice, the best course of action is to get your client on the phone to sort out the underlying issue. When calling, identify yourself and explain calmly and politely that you’ve followed up multiple times by email about a late payment. If possible, try to secure payment over the phone by credit card or direct transfer. If that’s not possible, get a firm commitment on the date and method of payment. Remain professional and friendly throughout the call, thanking the person for their time.
4. Consider Cutting off Future Work
If the promise of payment that you secured by phone is not met by your client, or if you’ve had to chase down payment from this particular client several times before, you may want to consider cutting ties with the company and refusing future work. If you’ve already begun working on other projects, you may want to stop working before the project is finished, if you’re contractually able to do so. Cutting off work until you receive your payment can motivate your client to pay you quickly, so the work they’re relying on you for actually gets finished. Cutting off work can also protect you from future losses if you’re no longer confident the client is capable of or willing to pay you. Be courteous but firm when letting the client know you’re refusing further work. Explain calmly why you’re taking this step. Be aware that even if you handle this situation in a professional manner, it may upset the client and escalate tensions.
5. Research Collection Agencies
If your previous attempts at tracking down late payments are unsuccessful, you may want to escalate things further by hiring a collection agency to help you secure the payment from the client. Hiring a collection agency can be an expensive option, as they often take as much as 50 percent of the amount they collect from a debtor, but recouping some of the money can be better than getting nothing at all. Make sure you do your research and hire a reputable collection agency by checking out Better Business Bureau reviews of local agencies and by ensuring the agency is a member of the Commercial Collection Agency Association.
6. Review Your Legal Options
If, after all your attempts, you still aren’t able to secure payment from the client, it may be time to consider your legal options. If you have a legally binding contract in place with the client that outlines the work you were obligated to complete, the payment amount due and the deadline for payment and includes both your signatures, you have a good case for a lawsuit. For smaller outstanding invoices you can take the client to small claims court, or if the amount owing is greater, you can file a civil case against the client.
Professional Payment Request Email Templates
If you’re unsure how to write professional payment request emails to send to clients for overdue invoices, these templates can serve as an example:
First Email Payment Request Template
Subject: [Your Business’s Name]: Invoice #001 Past Due
Hi [Client’s Name],
I hope you’re well. This is a reminder that Invoice #001 was due on Thursday, November 30 and is now one day overdue. I know I sent the invoice at a busy time and want to ensure you received it. I’ve attached the original invoice to this email.
You can send payment by check or pay by direct transfer. Please let me know if you have any questions about the invoice.
[Your Business Contact Details]
Second Email Payment Request Template
Subject: [Your Business’s Name]: Invoice #001 Past Due
Hi [Client’s Name],
I hope you’re well. I’m contacting you in regard to invoice #001. This is a friendly reminder that the payment was due on Thursday, November 30 and is now two weeks past due. Please send payment as soon as possible by check or direct transfer.
As per my payment terms, you will be charged a late fee of 2% per month for overdue payment.
I’ve attached the invoice to this email for your reference. Please let me know if you have any questions.
Can you please confirm that you’ve received this email? Looking forward to hearing from you.
Your Contact Details
How Do You Get Overdue Payment from Clients?
To get overdue payment from clients, small businesses should be persistent yet professional in requesting the late payment. Small businesses should begin by following up by email to request the overdue payment from the client. If several attempts to secure payment by email don’t work, then follow up with the client by phone. Have a polite conversation about the overdue invoice and attempt to secure payment from the client by phone.
If those approaches don’t work, businesses should consider the following actions:
- Hiring collection agencies
- Cutting all ties with the client
- Filing a suit in small claims court
- Filing a civil lawsuit
To avoid late payments in the future, consider adding late fees to your payment terms, charging monthly interest for unpaid interest. You should also think about establishing legally binding contracts with all your clients before starting work on a project.
Always go to court
If you cannot pay the debt, tell the creditor. Keep reminding the creditor during your case. If you are collection proof tell the creditor. Even if you do not have the money to pay the debt, always go to court when you are told to go.
A creditor or debt collector can win a lawsuit against you even if you are penniless. The lawsuit is not based on whether you can pay—it is based on whether you owe the specific debt amount to that particular plaintiff. Even if you have no money, the court can decide:
- the creditor has won the lawsuit, and,
- you still owe that sum of money to that person or company.
If you lose your case
The judge has already decided that you owe money to the plaintiff. The judge has not decided how you are going to pay the plaintiff back. The creditor has to follow a second step to collect the money you owe.
The creditor may have asked for an “execution” at the end of your case. If they get an execution from the judge, they can “levy on the execution.” This means it is legal for them to take your property. They will hire a sheriff or a constable. The sheriff or constable will bring you a copy of the execution and take your car or put a lien on your house.
If the creditor wants you to pay them money, they can take you back to court on a Supplemental Process to “garnish your wages.” They can take money out of your paycheck before you get paid.
If you are collection proof, the creditor cannot take any of your assets or income even though they have a judgment against you. If some of your stuff or some of your income is protected by exemptions, you need to know what and how much so that you can make sure that it is not taken from you. If you know what exemptions protect your income or things, you can tell the judge and the judge will not order you to pay from those assets and income.
Agreements when you do not have money to pay the debt:
The plaintiff and the judge will probably ask you again and again if you can pay anything towards the debt. They will also ask if you are willing to enter into a repayment plan. A repayment plan is an agreement with the creditor that you will pay back the debt by paying a set amount every month. The repayment plan may be part of a court order called an “agreement for judgment.”
If the agreement is made into a court order and you do not pay back the amount you have agreed to pay, you could be in violation of the court order.
Only agree to a repayment plan if you really agree. If you do not agree with the amount stated, or you cannot pay back any amount every month, do not agree to a repayment plan.
If you have income that is collection proof a court cannot order you to pay back the debt from that income. But if you agree in a repayment plan to pay a sum out of the protected income, the court can make you pay from your protected income.
What should you do if a friend owes you money?
Perhaps you took out a loan or bought something with your credit card for them because you had a better credit rating. Or perhaps you just lent them the money. And now they aren’t repaying you.
It would have been better to have thought all this through BEFORE lending the money… research has shown that nearly a third of people have fallen out with a friend or family member over an unpaid debt of £100 or less.
Before you take legal action, you need to consider two things:
- are you likely to win your case?
- does your friend have any money?
This article looks at whether it is sensible to take legal action and how you would do it in England or Wales. If you live in Scotland or Northern Ireland, the small claims processes are different – contact your local Citizens Advice office to find out about them.
Can you show you are owed the money?
To win a case, you need to have some evidence that your friend owes you money. This doesn’t have to be a written legal contract, with witnesses etc. Suing someone for money is a civil case and the judge will decide who wins “on the balance of probabilities”, looking at whose story seems most likely.
You can have a valid legal contract if it was just a spoken agreement between the two of you. But there does need to be something you can show. If you gave your friend £200 in cash and no-one saw you do this, you are going to have problems with this part…
If your friend denies you ever gave them the money or whatever you bought on their behalf, is there someone who was there when you discussed the loan? Do you have an email from your friend saying they are broke and could you help them out? Was the sofa delivered to your friend’s house not yours? Does your bank statement show a transfer to your friend’s account?
If the friend started making some repayments but then stopped, if these show in your bank account or if the friend was making the repayments on your credit card, that is good evidence that there was some sort of loan.
If you aren’t sure whether what you have is going to be “good enough”, then you could go to your local Citizens Advice Bureau and see what they think.
Was it a loan or a gift?
If your friend says the object was a present, does this seem plausible? Friends don’t usually give each other furniture or a car for Christmas.
But partners do give each other gifts, sometimes expensive ones. And parents may give a child a large sum as a deposit for a house.
If a gift seems plausible, the key facts in a court are likely to be whether there is any written evidence that the money was expected to be repaid. If some repayments were made, that suggests the money was not a gift, for example. See this newspaper article My ex says he will take me to court if I don’t pay him back thousands of pounds he gifted me to buy a new car which looks at one case.
Can your friend really afford to repay you?
If your friend has no money or assets, there is little point in taking them to court. Suppose you win the case – your friend now has a County Court Judgment (CCJ) but they may still not give you the money. They could apply to the court and offer you £5 a month say, which the court will agree to if that is all they can afford. Or they could just ignore the judgment!
If they have a house with a lot of equity, or a car that is worth something – not one bought on car finance – or a well-paid job, then there are ways that you can “enforce the court judgment” and get the money that you are owed, but these will:
- all cost you money;
- some, such as bailiffs, may well not work; and
- getting a charge over their house will not get you the money until it is sold. It is very, very rare to be able to force someone to sell their house.
This is a really hard decision to take because it feels so unfair.
But if your friend is in financial difficulty, getting a CCJ is very probably pointless. You will have wasted the court fees and not gained anything.
A more practical alternative may be to be sympathetic to your friend’s problems and ask them if they can pay you a small amount every week or month. Something is better than nothing…
What if you don’t know where your friend is?
If your friend seems to have moved, isn’t answering your calls and no-one knows where they are, this is very bad news. You can still sue them using their last address and win the case.
But that doesn’t mean you will get any money! If you don’t know where they are your chance of being able to “enforce” the court judgment are close to zero. The courts aren’t going to help you locate someone, nor will the police.
There is simply no point in pursuing this unless there is a lot of money involved, you have a very good case AND you know they have a lot of assets. Often the best you can do is assemble all the evidence you would have produced in court about the debt and keep it in a file, in case they reappear.
How do you sue someone?
Citizen’s Advice has a good guide about this.
The first step is to try to sort it out before going to court. You need to send your friend a “letter before action”, there is a template in the Citizens Advice guide. This letter needs to be posted and you should keep proof of posting.
It needs to give your friend a set period, usually a couple of weeks, to reply. This may seem frustratingly slow if you think they are going to ignore it, but it has to be done.
Sometimes a formal letter makes someone see sense and come up with a proposal for repayments. If they say they will repay say £30 a month, unless you are sure they can afford more, it might be wise to accept it rather than risk going to court.
After that you need to put in your “claim”. This can be on paper but it is most easily done using the Money Claim Online (MCOL) service. You shouldn’t need a solicitor to do this, but your local Citizens Advice can help if necessary.
There will only need to be a court hearing if your friend decides to defend the claim.
What does it cost?
If you sue someone you have to pay court fees at the start. The amount depends on the amount of money you are claiming. Issuing a claim for up to £300 costs £35 for example. There will be extra charges if there is hearing or if you need to try to enforce the judgment.
You may be able to get help with these fees if you are on a very low income.
In theory you get your costs back if you win as they are added onto what your friend owes. But this may not work if you don’t know where they are or they simply ignore the judgment.
Can I sell my debt to a debt collector? No, debt collection agencies would not be interested in buying this sort of private debt.
Can’t the police sue them and get my money back? No, the police will tell you this is a “civil” matter, not a “criminal” matter. They will probably suggest you go to your local Citizens Advice – which is a good suggestion!
What about money someone owes me outside the UK? Sorry, I have no idea. You need to take local advice.
Use these sample promise to pay letters as templates for your formal agreement.
Last updated on January 15th, 2019
When one party agrees to provide goods, services or money to another party the promise to pay letter is an indispensable component of the transaction. This document clearly and legally defines the agreement between the parties and may be used as evidence in a lawsuit if one of the parties fails to uphold their side of the bargain.
These documents don’t have to be long or complicated. However, it’s essential that they include a few basic elements so that the terms can be understood and interpreted by anyone who reads them.
Sometimes called a promissory note or an installment agreement , a promise to pay letter defines a transaction between at least two parties. Such agreements are common between companies that are agreeing to exchange money for goods or services.
These documents also may be utilized by insurance companies who ask customers to agree to certain payment terms. Payment agreements may also be arranged between private parties. Friends, family members and colleagues may all use these documents to help ensure fair dealings when loaning or accepting money.
The payment agreement protects each party in various ways. It clearly defines what the transaction is, such as a loan between friends. It identifies the parties and how much money is involved. It further delineates how and when the money will be paid back. For instance, the party loaning the money may require that the borrower pay them back with a cashier’s check while prohibiting the use of a personal check.
Moreover, the agreement may define what sort of penalty is involved if the money is not paid back as agreed upon. Interest rates are not always a part of these agreements. If the borrower will be required to pay interest, then this should be defined in the agreement, including how the interest will be calculated.
It is strongly recommended that the agreement be notarized or at least witnessed and signed by an impartial third party. This makes the agreement easier to defend in court, and makes it less likely that the document will be tampered with later. Each party to the agreement should receive a fully-executed copy for their files.
This level of detail is necessary for the protection of both parties because it makes it far less likely that disputes will arise. The promisor, the party borrowing the money, receives the assurance that the payee, the party loaning the money, will not claim that the loan was actually for a much larger amount.
Moreover, the written agreement makes it possible for the payee to prove that the promisor had a well-defined payment plan and that they did not comply with the schedule. Accordingly, it is less likely that litigation will arise from a dispute, and if litigation does occur, then the agreement may be what the court relies upon to make a decision.
A single page document is all that is required to make a binding promise to pay letter. The following example is a template that can be easily customized to suit a variety of transactions
Sample 1 – Promise to Pay Letter
Full, legal name of Payee
Full, legal name of Promisor
Total Amount of Loan
Final Due Date for Repayment
I, Payee Name (“Payee”), borrowed $1,000 from Promisor Name (“Promisor”) on Loan Date. By signing this agreement both Payee and Promisor acknowledge that Payee will pay back Promisor using the following payment schedule.
Payee agrees to repay Promisor with a personal check for $100 on the first of each month for 10 months beginning with January 1, 20__. The last payment will be made October 1, 20__, at which time the loan will be fully repaid.
Payee further agrees to pay a $35 per week late charge for every week that payment is delayed after the first of the month. This $35 late charge may be prorated as a $5 per day charge for each day that the payment is late for segments of time shorter than seven days.
Both Payee and Promisor agree to the payment agreement defined above.
Signature of Payee with Date
Signature of Promisor with Date
Signature of Witness or Notary with Date
Sample 2 – Promise to Pay Letter
FULL NAME OF PAYEE
FULL NAME OF PROMISOR
DATE OF LOAN
DATE REPAYMENT IS DUE
TOTAL AMOUNT DUE
TERMS OF AGREEMENT:
I, FULL NAME, borrowed $500 from FULL NAME on DATE. We both agreed that the money would be repaid in a series of scheduled payments.
I, FULL NAME, will repay the loan with a personal check in a series of $100 payments every month for five months starting DATE. The payments will be given to FULL NAME on the first of every month beginning with June 1st with the last payment being made on October 1st.
I, FULL NAME, will pay a $5 per day late charge for any payments that are not on time as agreed until the loan is paid in full.
The payee and the promisor agree to the payment agreement terms listed above.
Signature of Promisor DATE
Printed full name and address, email address, phone number of promisor
Signature of Payee DATE
Printed full name and address, email address, phone number of payee
Signature of Witness(s) DATE
Printed full name and address, email address, phone number of witness(s)
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I work as a graphic designer and I have a question that freelancers and a lot of people with small businesses face. How do you get clients to pay up in a nice way? I am trying to sort out my finances for 2014 and I sent two respectful emails to a client I did business with. I call them gentle reminders. I even put that on the email with the subject line “Reminder Invoice,” and then I called directly. My client was a non-profit women’s political action group and they love me.
I design quickly and I even got the presses to stop and make changes for no charge. I designed their marketing material and got it printed in just days for their annual event. It is now nearly 110 days since the invoice went out. The love they used to have for me seems to have clouded over after the event. In my experience, political groups and campaigns are the worst about paying. If they win, they get too busy to return your calls. If they lose, they just roll up in a ball.
P.S. A friend who I don’t even like owes me $30 for two tickets (for him and his wife) to see “A Most Violent Year” over the holidays. They have conveniently forgotten. I have yet to send them an email with the words “Reminder Invoice,” but I’m sorely tempted.
Mitch in New York
The first thing that strikes me about your question is that you are trying to balance your year-end books, but that email was sent 110 days ago. That means you sent your last invoice in September and it’s now January. Credit card companies don’t send an email, tick it off their “to do” list and then wait for a response. They wear their customers down with letter after letter after letter until the person finally cracks. Similarly, recruiters from religious cults (or theater clubs) don’t ask potential members just once to sign on the dotted line or send them one invitation in the mail — they call and call and call until they break you.
You need to send another email that is not gentle. Call it “Invoice” and drop the “Reminder.” Or call it “Reminder” and drop the “Invoice.” You don’t have to be a character from “Goodfellas” to send a serious email without any suggestion of weakness. And it doesn’t necessarily have to come from you. In fact, it’s better if it doesn’t come from you. Most people with small businesses bring in someone else to do the bill-collecting part of the job. It means you can keep smiling without awkwardness when you do business again with the same client. If the bill is $5,000, hire someone for a couple of hundred bucks to collect on your behalf.
Your card has been marked about the short-term memory of those who run political campaigns. You’ve found that the graphic designer is either yesterday’s news (if they win) or simply part of the collateral damage to their ego (if they lose) and is at the bottom of the financial totem pole. For 2015, identify those clients who were slow to pay in the past, and ask them to pay a large deposit now, and the rest on delivery of your services within 30 days. Put it on the contract so you can reference it in your invoice. Keep your emotions out of it. Of course, they will love you when it suits them and forget about you when you are no longer of use to them.
Your friend is a more complicated problem. There is a temptation to drop hints like, “Did you like the movie? Remember the scene where the guy had to beg his gangster friends for money?” Or you might be tempted to arrange two more trips to the cinema and say whoever gets there first buys the ticket, and then accidentally-on-purpose arrive late both times. But both of these scenarios are a lot of work for $30. Plus, passive-aggression in friendships is like dry rot in a house: It makes it weaker and leaves a bad smell. As you don’t even like your friend, take the advice from the guy in this earlier gangster movie: “Look at it this way, it cost you $30 to get rid of him.”