Help me get my money?
February 27, 2012 1:34 PM   Subscribe

How do I go about collecting money owed to me by a friend?

About a year ago, I loaned a friend a substantial amount of money (~$4000) to handle some short-term costs for his small business, including dealer fees for a booth at a large convention. He was to pay me back shortly after the convention, and had previously paid back smaller loans in very short order.

However, this loan's been a problem. Various conventions and other happenstances appear to have gone poorly for him and his business, and he's hemmed and hawwed about how or when he could pay me back. 2 months ago, I demanded that he start paying me back at least in installments, and he agreed that he could do that. He proposed a plan that would have me paid back in 2 years, while I told him that I'd really like to be paid in under a year.

In any case, the first and second payment dates have come and gone, and he's stated that he's unable to pay me anything, not even the smaller amount he said 2 months ago that he could pay. At this point, I am ready to go to small claims court, but I'm wondering whether I should tell him this first, or if it's better to just go ahead and file the paperwork.

I know Metafilter is not my lawyer, but if you've had any similar experiences, I'm hoping you can help me through this.
posted by anonymous to Law & Government (15 answers total) 2 users marked this as a favorite
Well, you call him a friend. I'd be inclined to let my friend know he's about to be sued, regardless of who the plaintiff is. He may just be able to get it together a whole lot more quickly if he thinks his credit and his friendship are on the line. Good luck. I don't envy you this bummer of a problem.
posted by heyho at 1:40 PM on February 27, 2012 [3 favorites]

Is the money more important than the friend? If so then proceed towards hard power (lawyers, court and such). If not then stay with soft power (patience and good communication).

At the end of the day: never loan a friend so much money that it's a big deal if it never gets back to you. You might just have to take this punch as the price of being an imperfect human.
posted by Murray M at 1:41 PM on February 27, 2012 [4 favorites]

Get everything is writing, keep a record of the conversations. I'd tell him that you're planning on collecting the money owed via small claims court. After that I wouldn't have any contact outside of collecting what you can and outside of the court system.

I had a similar experience, but I had planned on considering the money a gift when it came down to it. I made my friend sign a promissory note when he borrowed the money just to set expectations correctly, it took about 4 years to get paid back but I eventually did, without having to go through the courts.

I don't loan people - friends, family, etc money any more, it's just a straight up gift these days.
posted by iamabot at 1:44 PM on February 27, 2012

I don't see a downside to telling him, "Friend, I'm sorry to tell you this, but I've made the business decision to let a court handle this since you haven't paid the loan back. You should receive the complaint shortly. I didn't want you to be surprised."

Then go ahead and file the suit even if he makes new promises.

If someone who owed you money wasn't your friend, I think of course you'd tell them, since a lawsuit is a last resort, and, hey, it's just business. I think the fact that you have a personal relationship with him makes it even a more clear case that you give him a heads up. This will also help you in small claims court, since you'll come off as reasonable instead of petty.
posted by MoonOrb at 1:51 PM on February 27, 2012 [1 favorite]

Do you have a contract? It doesn't sound like it since you seem to be discussing when you will be paid *after* the fact rather than before. If no contract, how will you prove that the money was a loan?

As far as the question posed above, "is the money more important than the friend?" Well that could just as easily be posed to the person you loaned to. He doesn't seem to value your friendship much if he is not paying you anything at all, and if you are the one who has to push to be repaid. If he were honorable, he would be paying you at least something, as well as sticking to any plans he made. He would be coming to you, you wouldn't have to come to him. He is showing you that he isn't a great friend. Even if he is just about to go bankrupt, he should still be trying to find a way to pay you, even if that's through sweat equity (do you need any work done that he is qualified to do?)

Given that he's not acting like a friend, I would treat him like a stranger you loaned money to in a business transaction: notify him by certified letter that you expect X amount by Y date, otherwise you will be suing in small claims court.
posted by parrot_person at 1:53 PM on February 27, 2012 [3 favorites]

I've loaned substantial amounts of money to friends in the past, in fact I have someone who owes me $4000 which they said they'd repay when they got their tax refund. As far as I know, they got their refund and went to Disneyland. !!!

Things involving money can get really bad, it's one of the most significant stressors for people regardless of the economy or how much they make, etc.

Can you evaluate your friend's ability to pay based on his income and savings? I think knowing those factors will really help you figure out the best way to come out of this with as much of your relationship intact and as much of your money as possible.

If your friend does not consider paying you back a priority, then you're probably not going to see that money even if he wasn't in a financial slump. Does your friend even have the small installment payments or is he just in a terrible situation of wanting to pay you and having to prioritize rent, bills and groceries? If it's the latter, taking him to small claims court isn't necessarily going to get you the money if he doesn't have it. The best you'll get from a judgment is the ability to put a lien on his property or garnish his wages. If he's completely broke with few assets, you're not going to see that money until he's actually got it to give.

I'd advise you to talk to him and see if you guys can have an honest discussion about both of your concerns. If he's unwilling to repay you because he's a shitty friend, then by all means tell him you are left with only the legal means to get that money back, including all fees associated with small claims court. He might be too hard up and too ashamed to pay you back at which point taking him to court won't do either of you much good.

I hope it all works out and you know, I think you were a good friend to loan him that money. I hope he's a good friend back.
posted by loquat at 1:57 PM on February 27, 2012

Unless you seriously need the money, I say just let it go and lose the friend.

Losing a substantial amount of money is always painful. But with amounts of money after courts and collections and your time it's difficult to say that what you end up getting will be worthwhile. Of course this depends once more on the value of your time and the work it will require.
posted by jjmoney at 2:33 PM on February 27, 2012

Do you need the money? Are you comfortable waiting longer than a year if you still get your money? How well do you know this friend, and do you think he intends to pay you back when he has money? Do you have a contract or at least something written down in some form?

Court will be a big pain/stress and will have some costs as well, depending how far you pursue it. Depending how badly you need the money and how strong your case is vs. how much hassle it'll be, it may be less stressful for you to just write it off.

Anecdote: I loaned an out-of-work live-in boyfriend (at the time) just under 4000$ maybe 2 years ago. He's paid off over half of it now, in installments (since finding work). He agreed to give me a certain amount every month but hasn't stuck to that at all. I don't bring it up but every few months he's been giving me several hundred bucks. We're still friends and haven't had much tension about the debt, probably because I don't bug him about it. I'm fine with the slow repayment, other people might not be. I think he'll pay it all back eventually, probably within the next year, but I'm ok financially if he doesn't (not in debt, but obviously I would still prefer to have the remaining $2k, which is still a big chunk of money for me!). We don't have a contract, since it was loaned in bits and pieces. I'm not charging him interest.

(also loaned a separate friend 10k for his small business, but since that's not up for payment yet, it's not as relevant. we have a contract, including interest).
posted by randomnity at 2:38 PM on February 27, 2012

If you want to salvage your friendship, don't sue your friend. If you don't care at this point, then don't bother telling him first.
posted by crunchland at 3:13 PM on February 27, 2012 [1 favorite]

Can you evaluate your friend's ability to pay based on his income and savings? I think knowing those factors will really help you figure out the best way to come out of this with as much of your relationship intact and as much of your money as possible.

Agreed, if he really doesn't have any money right now, he can't pay you back at the moment.

These questions always interest me because I would love to know what's going on in the minds of people who won't pay back personal loans. I think the problem is often that the friend doesn't think you really need the money. A close friend borrowed money from me and it almost immediately became clear that he didn't plan to make good. This seemed totally appalling and out of character for him and it still does. He paid me back eventually-- minus a discount I gave him in exchange for speeding it up-- but he has asked me for loans a couple of times since then. Each time I've refused and reminded him of what happened that first time, and he always says something about how he didn't think I needed the money. And, you know, on some level that is true, I could have taken the financial hit without becoming homeless or anything. But it would have been a hit, plus his behavior was hurtful to our friendship. When we've had these subsequent conversations-- with requests for loans-- he acts like he thinks it's perfectly normal to borrow money from friends and then make them screw it out of you. (I'm still mad, can you tell?)

Anyway, what worked for me was to offer him a discount in return for paying up immediately. He still showed up with only have the money the first time, and then paid the rest back in dribs and drabs. But the discount seems to have been what got the wheels going. Maybe you could offer your friend a discount in return for signing a note, if he is really broke now?
posted by BibiRose at 3:37 PM on February 27, 2012

$4000 is a lot of money, so I can understand that you want to recoup it. However, if you take this to court, you are going to need to have some proof that both you and your friend considered this a loan and not a gift if you want to get that money back.

If you don't have a promissory note (always get a signed promissory note when lending money!), are you sure you can count on this friend (who has never paid you back) to agree, in court, that you *loaned* him the money? He could just say, "We were friends, and I thought the money was a gift". Since he never made you any payments at all, right now there is nothing to indicate he felt he would have to pay you back, that he in fact promised to do so. It is simply your word against his. Even in a small claims court, you may not get a judgment in your favor at this point.

If you could get your friend to make at least one payment, that would make it clear this was obviously understood to be a loan you made him--but then, if you could do that, you wouldn't need to take him to court, would you?

I'm sorry. You may just have to write this money off.

One other thing you might try, though, is to tell your friend that you are PLANNING to take him to small claims court. He might be worried enough to hastily scramble together a payment for you so you won't do that. Then you'd have some of the money (and if you did eventually go to court anyway, you'd be better able to prove your case that it was a loan). But if he doesn't have the money to make even one payment, you're not getting it back in small claims court, anyway.
posted by misha at 4:05 PM on February 27, 2012

A small claims court judgment could set up a situation where he is literally paying one dollar a month until the debt is repaid, which is kind of stupid, but it has happened to me. That was my reward for being a hard ass.

A better resolution might be to keep a ledger card with you, and get him to give you something each time you see him, and let him watch you mark it on the card. Whatever he has or can spare, it's better than a dollar a month judgment. My experience is that if the party knows you are collecting this way, then they can offer what they have, and they will. The trick, of course, is to always have your ledger with you, and say thank you for whatever (no matter how small) amount they give you.

I've done this with a couple of "defaulted" friends when they were down, and as soon as they were back up again, they took great delight in bringing me bigger amounts to mark off the card. I recouped every penny of the loans, and would probably loan to them again. It's amicable and non-threatening, and much more "concrete" than setting up payment plans or dealing with his mollifications to get you off his back.

If it sounds old-fashioned and naive, well, it probably is. But that's what usually works.
posted by halfbuckaroo at 4:16 PM on February 27, 2012 [5 favorites]

Do you want to try to salvage the friendship? Telling him first is more likely to help with that. It's not like advising him that you intend to do this has to delay your lawsuit.
posted by J. Wilson at 5:01 PM on February 27, 2012

Step 1: Do you want a) the friend or b) the money? Also, is friend (c) really destitute: no sellable assets and no cash flow they can divert towards paying you?

If (a) or (c) then forgive the loan and move on. If (b) then tell friend "I need the money, and while it pains me to say this, the next step if you don't give me [amount] every month until repaid is court.

Your friend may not have enough to pay everyone easily, but if they have assets they can sell with (their laptop, their DVDs, their silverware, their savings), cuts they can make in their expenses (no more eating out, etc), or have other bills they are making higher priority than yours, they can instead make yours higher priority because you're making it matter to them.

Personally, though, if it were my friend and I could live without the cash, I'd let it go.
posted by zippy at 5:11 PM on February 27, 2012

Doesn't sound like much of a friend. A friend with integrity would, no matter how broke, set up a system of repayment even of a few bucks a week and stick to it, thus showing you respect and goodwill and gratitude. I'd request this, and accept very little if he's really in trouble, but require a real committed effort. If he won't do it, he doesn't sound like much of a friend.
posted by fivesavagepalms at 5:53 AM on February 28, 2012 [2 favorites]

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