When a friend doesn't repay a loan

12 years ago

Against our better judgement, we loaned a friend money for a business deal that didn't work. We have a promissory note, but the collateral does not belong to the friend anymore because of divorce. The money was loaned with the understanding that it would be repaid in one payment, in one month, with good interest. That was almost 5 years ago.

We still maintain email contact with this friend. We know her family. She is intelligent and ambitious, but apparently is having a difficult time getting back on her feet, and still has no assets. The loan amount is large enough that we are unwilling to write it off. What recourse do we have?

We'd appreciate any advice.

Comments (21)

weedyacres
12 years ago
Your options are:
1. Write it off
2. Talk to her and make arrangements for payments
3. Sue her.

If you sue her, you will win a judgement in court if your paperwork is in order, and that will give you the power to put a lien on her assets, garnish her wages, etc. Of course, if she has no assets you won't get anything for a while, and you can choose to wait to enforce it. There is also the risk that she'll declare bankruptcy, which will wipe out the judgement.

It is possible that the collateral is still accessible by you, even if a divorce decree says otherwise. I know if a couple divorces and the divorce decree says party A gets the house and must refinance it to get party B's name off the loan, if party A fails to do so the bank can still go after party B. Party B can sue Party A to enforce the terms of the divorce, but a divorce decree's division of assets does not trump liens on those assets.

Did you record the promissory note? Is the collateral a house?
Billl
12 years ago
"That was almost 5 years ago."

I'd call an attorney ASAP if you are considering suing. The clock is ticking and every state has a finite limit on how long you can collect bad debts.

However, if she really has no money, what is the point? You'll run up a big legal bill and get a judgement against someone who is broke.

You might want to consult a tax professional and see what your option are in terms of writing off the bad debt and claiming it as a loss for tax purposes. That might be the only way you will see any real cash in the near future.
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I imagine it must be difficult to want to help your child every step of the way, to make their lives easier, perhaps, than your's was at their age. I don't have kids so I've avoided that minefield. But boy do I ever hear from my friends and their kids, lol. I think about how my parents were with my brother and me (both are now dead). They were pretty much "all about" getting us to a stage where we knew right from wrong, listened to our consciences/inner voices, knew how to discern between "need" and "want", and were able to figure how and when to indulge "want" with minimal worry about how to fund it. Teaching us to be honest, resourceful, and hard-working was their goal. "Lazy" and "entitled" were probably the two worst things they could ever have called us; and the same could be said of the helpmeet and his brothers. I hate to come down too hard on young people in general, because I know many fine, hard-working, industrious kids. But I do think there are a lot more very pampered, spoiled kids now and I have to say I hold their parents responsible (parents who are my age!). I think it takes a lot of guts to post the sort of question you did, Wigardener., would that more parents did! You're right on this one; accountability and responsibility build character, even though the adjustments can be bruising (for both of you). You're right on this! don't let the "guilties" eat away at your resolve. Remember, much as you may want to, you are not in a position to foot the college bill. One day your son will reflect on this time in his life (the way I have in the past few years) and he will arrive at new appreciation for all you've given him.
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nycefarm_gw
12 years ago
Why did you not trust your better judgment? I am not trying to be harsh, but want to understand what compelled you to NOT follow your natural instinct?
pink_overalls
Original Author
12 years ago
To answer nycefarm, we went ahead with the loan because we have known this woman for over 30 years. She has always acted responsibly, and she has always managed to make money. Also, we wanted to help her, we saw an opportunity to make easy money (Don't judge us. We're all greedy), and the turn-around was quick.

I know that she doesn't have a problem with anything like drugs or gambling or alcohol, but I am now seeing the possibility that she may be avoiding making money because she owes other people, and whatever she earns can be garnished. I know that she has been trying to broker some international commodity purchases. She's used to making large amounts of money and probably can't see herself taking a regular job.

We plan to see a lawyer. What I want to know is what kind of clout we have.
nycefarm_gw
12 years ago
Good luck!
C Marlin
12 years ago
Personally I would write it off even though you said you didn't want to. My time and emotional health is worth more than the money. If it is eating at you, maybe it is worth it for you to pursue.
First look at your easy legal remedy, it will tell you how to proceed, but it appears she has no assets and no income, what legal remedy do you have to get the money?
I'm just saying... look at the whole picture then decide how to proceed.
deb_pa
12 years ago
Little bit I learned about lending money. The people you think will pay you back -don't. The people you figure won't pay you back - do. The lesson I learn: don't lend money unless you can mentally, emotionally and physically afford to lose it.
wantoretire_did
12 years ago
we saw an opportunity to make easy money (Don't judge us. We're all greedy), and the turn-around was quick. No, we are NOT all greedy, and heed the "If it sounds too good to be true, it probably is" theory. Adhere to "Never a borrower or lender be" as well.
sushipup1
12 years ago
Deb said, "The lesson I learn: don't lend money unless you can mentally, emotionally and physically afford to lose it."

You can add the same thing about friends/family, too. Can you afford to lose the relationship? because that will be damaged, as well.
wantoretire_did
12 years ago
Both are excellent points and well worth remembering....
xminion
12 years ago
Even if you win in court, she could file for bankruptcy to get away from the judgement. Check the laws in your state before proceeding to an attorney.
joyfulguy
12 years ago
Isn't putting more money into the hands of an attorney ...

... sort of sending more good money after bad?

ole joyful
sushipup1
12 years ago
It would all depend on how much money is involved. Would it be worth $10,000 to collect $50,000? Of course!

Back to the original question, id the debtor has no assets, then you have nothing to recover. If you force the issue, and she declares bankruptcy, then you are really out.
feedingfrenzy
12 years ago
I'm glad you're seeing a lawyer because much of the advice on this thread, however well intentioned, is just plain wrong from a legal standpoint. From the facts you present, it's impossible to tell whether it would be best to take legal action against her or just write it off and that's why you need to seek counsel from a lawyer experienced in debt collection.
marge727
12 years ago
Actually the advice is about what I would tell a client. If somebody has no assets, you loaned her money 5 years ago and she states her current job is brokering some international commodity purchases, this sounds like a debt collection company would not get good results from her. She possibliy owes other debt; commodity trading takes money and nerve and experience.
marge 727
'
watsonair
12 years ago
You are just going to have to put your foot down. It may get nasty, but with a large amount of money that someone owes you needs to be returned! She just can't go about her life and hope that you never bring it up or ask for it back. She will have to find a way somehow to re-pay you.
xminion
12 years ago
pink overalls,

OP! What did your lawyer say? Please don't leave us hanging.....
dreamgarden
12 years ago
"She just can't go about her life and hope that you never bring it up or ask for it back. She will have to find a way somehow to re-pay you."

That would be my position as well. I'd be curious to know what amount she owes.
dbrad_gw
12 years ago
I'd say that is a one-sided relationship, and definitely not a friendship. She sees you as something other than a friend.
jannie
12 years ago
When I was first married, over 30 years ago,
I borrowed $1000 from my
Mother to buy a car.Yes, in those days you could buy a decent used car for one thousand. Hubby bought a brand new Datsun for about $3000, I bought a used Ford. I paid Mom back $100 a month for a year, the last 2 payment being her "'interest". When we wanted to buy a house, hubby borrowed $5000 from his parents. After we moved in, they told us to keep the money, consider it a gift. I know this in no way compares to your situation, but I felt very uncomfortable owing relatives money.
jannie
12 years ago
Since you were once close friends, I think you should get in touch with her and have a real, heartfelt sit-down meeting aboiut this. Be kind, but remind her of the full amount and her promissory note. You don't want her to file bankruptcy to get away from this. You just want her to pay back what she owes. Perehaps (hopefully) you can work out a compromise. She's under pressure, you don't want to make her feel worse. Is there anyway you could negotiate say, half the amount paid in full within 60 days? Or are you dead-set that she must pay back every penny? I really hope you can work something out. Good luck.

When a friend doesn't repay a loan

Comments (21)

weedyacres

Billl

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When a friend doesn't repay a loan

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