Your sibling asked you to cover their rent for a couple of months while they were between jobs. Or maybe you loaned a friend a few hundred bucks for a car repair they couldn\u2019t afford.<\/p>\n\n\n\n
You\u2019d do anything to help those you love. And you did. But what should you do when they don\u2019t pay you back? Consider these options.<\/p>\n\n\n\n
Gently approach the subject<\/strong><\/p>\n\n\n\n Asking a friend or family member<\/a> for money back may feel uncomfortable. But sometimes a simple reminder is all it takes to jump-start debt repayment<\/a>.<\/p>\n\n\n\n Before reaching out, think back to the discussions you had when you offered the money: Did you make it clear that this was a loan, not a gift? Did you confirm payment terms and a deadline? Did you get the details in writing?<\/p>\n\n\n\n Framing the conversation around facts rather than your feelings, or unspoken opinions, can prevent confusion. No matter the context, bring up the issue calmly (and privately) and avoid making assumptions. Using harsh or accusatory language can not only strain the relationship, but it can also make your loved one less likely to pay up.<\/p>\n\n\n\n \u201cWhat we have to do is create space for that individual to come out of a shame mindset and perspective, and become less avoidant to engage in a healthy conversation,\u201d says Michael Thomas Jr., an accredited financial counselor who teaches in the University of Georgia\u2019s financial planning program.<\/p>\n\n\n\n Acknowledge what\u2019s happening in your loved one\u2019s life and be upfront about your own situation. Then, you can discuss how to move forward. \u201cI think the best approach is just to come at it with a lot of empathy and understanding that you\u2019re both in it together,\u201d says Thomas Nitzsche, director of media and brand at Money Management International, a nonprofit financial counseling and education service.<\/p>\n\n\n\n Make or revise a payment plan<\/strong><\/p>\n\n\n\n Ideally, before lending them money, you\u2019d have made a loan agreement outlining how much the borrower owes, how they\u2019ll pay, when payment is due and what to do if they can\u2019t pay.<\/p>\n\n\n\n If not, or if the person can\u2019t meet the original terms, hash out a new plan. Consider extending their deadline or allowing them to make smaller payments. Thomas says setting up automated payments through a peer-to-peer platform<\/a> can make it easier to get repaid over time.<\/p>\n\n\n\n A traditional payment plan isn\u2019t the only option. Perhaps your friend or relative could chip away at the balance by periodically covering one of your bills, Nitzsche says, or paying for a meal.<\/p>\n\n\n\n If your loved one is struggling to come up with cash, perhaps they can repay you with service. \u201cSuppose the lender needs a family room painted or new faucets installed. A borrower with those skills might be happy to work off the debt,\u201d attorney Cara O\u2019Neill, a legal editor at Nolo, a self-help legal website, said in an email.<\/p>\n\n\n\n Forgive the debt<\/strong><\/p>\n\n\n\n Working out an arrangement can be stressful, especially if your loved one doesn\u2019t come through. Waiving the debt could be the best move for your peace of mind and relationship. However, you might reconsider giving this person, or anyone, money again unless you\u2019re prepared to lose the amount. Think carefully about how forgiveness would impact you.<\/p>\n\n\n\n Thomas suggests asking yourself: \u201cIf I do not get this money back, it\u2019s not just how will I feel, but how will this affect any of my financial goals or anything that I have planned to do with those resources?\u201d<\/p>\n\n\n\n Take legal action, as a last resort<\/strong><\/p>\n\n\n\n Thomas doesn\u2019t advocate suing friends or family in most cases. But that path might be worth exploring \u201cif there are large sums of money on the table and there is an individual who you have reason to believe has the capacity to pay,\u201d Thomas says.<\/p>\n\n\n\n It\u2019s important to have evidence on your side, too. You\u2019ll have an easier time proving the case if you have a written contract, O\u2019Neill said. If you think you\u2019ve got a chance, there are a couple of ways to proceed.<\/p>\n\n\n\n \u201cThe quickest and cheapest way to get a money judgment is through the small [claims] court system,\u201d O\u2019Neill said. \u201cThe judge resolves small court cases in one court appearance, and the filing fee and service of process fees usually cost less than $200.\u201d<\/p>\n\n\n\n If the loan amount exceeds the small claims limit \u2014 generally $5,000 to $10,000, depending on the state \u2014 the case will take significantly longer and be more expensive, O\u2019Neill said. \u201cThe filing fees will be more and the lender might need to retain counsel because the traditional court system is more challenging to navigate without an attorney.\u201d<\/p>\n\n\n\n Even if you get a judgment in your favor, that doesn\u2019t mean you\u2019ll get your money back, Nitzsche says, \u201cparticularly if the person who had the judgment against them is on certain types of protected income, like disability or Social Security. That creates an extra wrinkle because you can\u2019t get a garnishment against wages<\/a>.\u201d<\/p>\n\n\n\n If you go this route, prepare to burn bridges. Will it be worth it if you get your money back? Will it be worth it if you don\u2019t?<\/p>\n\n\n\n This article was written by NerdWallet and was originally published by The Associated Press.<\/em><\/p>\n\n\n\n More From NerdWallet<\/strong><\/p>\n\n\n\n Lauren Schwahn writes for NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.<\/p>\n\n\n\n The article A Loved One Owes You Money. Now What? originally appeared on NerdWallet.<\/p>\n","protected":false},"excerpt":{"rendered":"Your sibling asked you to cover their rent for a couple of months while they were between jobs. Or maybe you loaned a friend a few hundred bucks for a car repair they couldn\u2019t afford. You\u2019d do anything to help those you love. And you did. But what should you do when they don\u2019t pay […]","protected":false},"author":7,"featured_media":2738,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"","attr_excerpt":["Your sibling asked you to cover their rent for a couple of months while they were between jobs. Or maybe you loaned a friend a few hundred bucks for a car repair they couldn\u2019t afford. You\u2019d do anything to help those you love. And you did."],"footnotes":""},"categories":[5],"tags":[7,21,35,43,20],"class_list":["post-2729","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lifestyle","tag-bank","tag-checking","tag-digital-banking","tag-financial-wellness","tag-savings"],"yoast_head":"\n