Collecting Debts: How to Get Money Back from Your Friend Legally?

07 Nov 2019 01:37pm, by YorkshireSquare

Loaning money to your friends is not the kind of behaviour we recommend. In general, it is recommended that you do not establish such a relationship with your family members and close friends, as a debt relationship will cause an awkward situation for both parties. However, if your friend does not pay the loan, this situation can become even more annoying. Maybe, he met one of his needs with the money he borrowed, or maybe he used it in a casino for all slot bonuses: no matter the reason for the loan, we advise you to talk to your friend who doesn't pay the money he borrows first. Legal sanctions should be your last resort. And do not forget that this option will completely terminate your friendship. In this context:

  • Speak directly with your friend and use a clear language, not gentle reminders.
  • If necessary, specify that he/she can repay the debt in installments and provide this as an option.
  • In any case, set a deadline and never extend it. Tell your friend that when this deadline is over, you will seek legal options.
But if all of the above fails, what can you do legally if your friend still doesn't pay his debt?

Start with Collecting Evidence

In order to use legal options, you must be able to prove the debt relationship between you and your friend, before anything else. In other words, you need evidence that shows that your friend has borrowed money from you. The same evidence must show the exact amount of debt too.

Promissory notes are extremely useful in this respect and are considered legally valid evidence. You can think of these notes as a signed contract that defines the debt relationship. A promissory note clearly indicates how much your friend borrowed from you, when he borrowed the money, and when he must repay it. You can find a number of promissory note templates on the Internet, but this document does not have fixed rules. In fact, any document bearing both sides' signature (and containing the information mentioned above) will be enough and accepted in courts. If you have a document like this:

  1. Start by sending a written request to your friend by mail. This demand is generally known as the “demand for money” document. It does not have a fixed template – you can just attach a copy of the promissory note and write that you request payment of the debt. Otherwise, you will take legal action. A lawyer is not required to send this document. However, if you send it yourself, make sure to send it by registered mail.
  2. If you still have not been paid, you have two options. If you are a business, you can apply directly to a collection agency and try to collect the debt through them. If you are a natural person, you can contact a lawyer and submit another demand for money document bearing his signature.
  3. If none of these options worked, you can go to court. You will often need to apply to a small claims court, but you may need to apply to a different court based on the amount of the debt. We strongly recommend that you seek help from a lawyer at this stage.
If you do not have a promissory note, you can use any document proving the existence of the debt (i.e. chat and email correspondences, even SMS). However, these will not be as effective as a promissory note. In addition, the legal remedy you have to follow may vary according to the laws in your country. Therefore, in any case, we recommend that you first consult a lawyer.