Debt repayment to a friend and negotiations have become threatening

Debt negotiations become threatening

Recently on our forum we had a user ask about debt repayment to a friend and what to do when the debt negotiations had become threatening. Without more specific information it is difficult to offer advice, but this blog will address what is considered a civilized way to settle personal debt disputes.

Steps to stop debt collection

1. Ask for specific information about the debt.

If you agree you owe money to a friend and you do not have a written contract, it is time to get specific details about the loan. Talk to your friend and ask for written information about the debt, including the amount of the original loan, why it was loaned, the current balance due and the amount of the last payment.

2. Document the terms of the loan.

Next, it is time to write down the payment arrangement. Can you agree to pay $100 each week until the loan is repaid? If not, discuss what would be a fair arrangement. Finalize how they want to receive the money. Do they want a check or money order? Where should you send the payments? You might say, for example, "Payments should be mailed to (your address) with checks and money orders made payable to (your name)."

Do not just hand them $100 dollars. Make sure you have proof of payment. Next, make sure you have identified a specific time when the loan should be repaid.

3. Identify the consequences of not paying the loan.

Both parties should also agree that if the loan is not repaid there will be specific consequences. If you fail to make the loan payments, for instance, they will have the legal right to file suit against you. Most cases for small loans can be filed in a small claims court. The dollar limit for small claims may be anywhere from $3,000 to $10,000 and varies by state.

If you have a written contract and each party understands the penalties for breaking the contract there won't be any surprises when you are sued for failing to make debt payments. If you do not make debt payments you should expect to appear at a court hearing to plead your case.

If the creditor wins their case against you, you will be ordered to pay a judgment. If the creditor wins a judgment against you in some states they may be able to have your wages garnished or bank accounts levied.

What's the bottom line?

If a friend has started threatening you for repayment of a personal loan and changing the terms of your loan agreement it's imperative to get everything in writing. Not only will a written contract protect you, it can eliminate misunderstandings and outline the specifics of the loan agreement. Next, make sure all payments can be traced. If you have to pay cash be sure to get a receipt for payment. Unfortunately, if you are unable to make loan payments and your friend is not willing to negotiate, they may have the right to sue you for repayment.