How to collect debts from your loved ones

Your brother asked you to cover his rent for a few months while he was between jobs. Or maybe you loaned a friend a few hundred dollars for a car repair he couldn’t afford.

You would do anything to help those you love. And you did. But what if they don’t refund you? Consider these options.

Bring up the subject gently

Asking a friend or family member to pay back money they owe can be uncomfortable. But sometimes, a simple reminder is enough to restart the repayment of the debt.

Before you reach out, think back to the discussions you had when you offered the money: did you specify that it was a loan and not a gift? Have you confirmed payment terms and a deadline? Did you get the details in writing?

Framing the conversation around facts rather than your feelings or unspoken opinions can avoid confusion.

Regardless of the context, approach the issue calmly (and privately) and avoid making assumptions. Using harsh or accusatory language can not only strain the relationship, but also make your loved one less likely to pay.

“What we need to do is create space for that person to move out of a shameful mindset and perspective, and become less avoidant to engage in healthy conversation,” says Michael Thomas, a licensed financial advisor who teaches at the University of Georgia. planning program.

Acknowledge what is going on in your loved one’s life and be candid about your own situation. Then you can discuss how to move forward.

“I think the best approach is to just come at it with a lot of empathy and understand that you’re both in this together,” says Thomas Nitzsche, director of media and brand at Money Management International, a non-profit financial advisory and education service.

Establish or review a payment plan

Ideally, before lending them money, you would have a loan agreement outlining how much the borrower owes, how they will pay, when payment is due, and what to do if they cannot pay.

If not, or if the person cannot meet the original conditions, develop a new plan. Consider extending their deadline or allowing them to make smaller payments.

Setting up automated payments through a peer-to-peer platform can make repayment easier over time, Thomas says.

A traditional payment plan is not the only option. Perhaps your friend or relative could nibble away at the balance by periodically covering one of your bills, Nitzsche says, or paying for a meal.

If your loved one is having trouble finding money, they may be able to repay you with a favor.

“Let’s say the lender needs to paint a family room or install new faucets. A borrower with these skills might be happy to pay off their debt,” says attorney Cara O’Neill, legal writer at Nolo, a self-help legal website.

forgive the debt

Finding an arrangement can be stressful, especially if your loved one doesn’t show up. Debt cancellation might be the best solution for your peace of mind and your relationship.

However, you might consider giving the money back to that person, or anyone else, unless you are prepared to lose the amount. Think carefully about how forgiveness would affect you.

Mr. Thomas suggests asking yourself, “If I don’t get this money back, it’s not just how I’ll feel, but how will it affect any of my financial goals or anything I have. planned to do with these resources?”

Take legal action as a last resort

Mr. Thomas does not advocate suing friends or family in most cases. But this path could be worth exploring “if there are large sums of money on the table and there is a person who you have reason to believe has the ability to pay” , he said.

It’s also important to have evidence on your side. You’ll have an easier time proving the case if you have a written contract, says O’Neill.

If you take this route, be prepared to burn bridges. Will it be worth it if you get your money back? Will it be worth it if you don’t?

Updated: May 11, 2022, 04:00

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