Legal How-To: Collecting Money Owed to You
Have you ever loaned out money to a friend or loved one and they just never quite got around to paying you back?
It's certainly an awkward situation, but there are ways to "mean business" and get legal in order to get your money back. Below, you can read about a few ways on how to go about collecting money that's owed to you:
- Determine whether it was an oral or written promise. Despite popular belief, oral contracts are enforceable. However, certain types of agreements must be in writing in order to be legally enforceable. If you and your debtor made an oral agreement, make sure it's even enforceable before you hound the debtor via legal action.
- Try a demand letter. If you can't get a hold of the debtor or if he or she is unwilling to cooperate with you, you may want to draft a formal demand letter asking for payment. You'll want to include information such as the amount owed, a firm request for payment, a deadline for response and payment, a list of acceptable forms of payment, and what you will do if he or she fails to pay.
- File a lawsuit. Keep this option as a last resort as the court will want to see that you've tried everything else possible. Check your state small claims court laws to determine if your claim can be filed in small claims court. The dollar limit for small claims may be anywhere from $3,000 to $10,000. If you cannot file your suit in small claims, you will need to file it in your district or county court.
- Check the statute of limitation on debt collection. You may not be able to up the ante and file a lawsuit to collect debt if you waited too long to file a lawsuit. Every state has enacted its own statute of limitations for debt-related claims, requiring any lawsuit be filed in court within a set time frame.
Need More Help?
The process of recovering money owed to you can be tricky, especially if it involves close friends and family. To help navigate the sticky situation, you may want to speak to a collections attorney to try to find a minimally invasive solution.