Millennium Money: A loved one owes you money. What now?

Your sibling asked you to pay them rent for a couple of months while they were between jobs. Or maybe you lent a friend a few hundred dollars to repair a car they couldn’t afford.

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

YOU WANT TO APPROACH THE TOPIC

Asking a friend or family member for a refund may be inconvenient. But sometimes a simple reminder is enough to get you started debt repayment.

Before you ask, remember the discussions you had when you offered money: did you make it clear that it was a loan, not a gift? Have you confirmed the payment terms and deadline? Did you receive the details in writing?

Framing the conversation around the facts, rather than your feelings or unspoken thoughts, can prevent confusion. Whatever the context, ask this question calmly (and privately) and avoid speculation. Using harsh or accusatory remarks can not only worsen the relationship, but also reduce the likelihood that your loved one will pay.

“We need to make room for this person so that he or she can get out of shy thinking and perspective, and avoid avoiding healthy conversations,” said Michael Thomas Jr., an accredited financial advisor who teaches at the University’s Financial Planning Program. Georgia.

Recognize what is happening in the life of your loved one, and be honest about your situation. Then you can discuss how to move on. “I think the best approach is to just approach it with a lot of empathy and an understanding that you’re both together,” said Thomas Nietzsche, director of media and brand for Money Management International, a nonprofit financial advisory and education service. .

MAKE OR REVIEW BOARD PLAN

Ideally, before you lend them money, you should enter into a loan agreement that specifies how much debt the borrower will pay, when he will pay, and what to do if he cannot pay.

If not, or if the person cannot meet the initial conditions, post a new plan. Consider extending your term or allowing smaller payments. Thomas says setting up automatic payments through a peer-to-peer platform can make it easier to get repayments over time.

The traditional payment plan is not the only option. Perhaps your friend or relative could destroy the balance by periodically covering one of your bills, Nietzsche says, or paying for food.

If your loved one is having a hard time finding cash, he or she may be able to repay you with a service. “Suppose a lender needs a painted family room or new faucets installed. A borrower with these skills can be happy to pay off a debt, “said lawyer Kara O’Neill, editor of legal issues at Nolo, a self-help website, in an email.

GOD’S STAY

Making arrangements can be stressful, especially if your loved one is not dating. Debt relief can be the best step for your peace of mind and relationship. However, you can reconsider giving this person or anyone money again if you are not ready to lose the amount. Think carefully about how forgiveness will affect you.

Thomas suggests asking himself, “If I don’t get this money back, is it important not only how I feel, but how it will affect any of my financial goals or what I plan to do with these resources?”

TAKE LEGAL ACTION AS THE LAST MEASURE

In most cases, Thomas does not call to sue friends or family. But this path may be worth exploring, “if there are large sums of money on the table and there is a person in whom you have reason to believe he can pay,” says Thomas.

It is also important to have evidence on your side. It will be easier for you to prove your case if you have a written contract, O’Neill said. If you think you have a chance, there are several ways to continue.

“The fastest and cheapest way to get a decision on money is through a system of courts for small (claim) courts,” O’Neill said. “A judge decides small lawsuits for a single appearance in court, and court fees and court fees usually cost less than $ 200.”

If the loan amount exceeds the limit of small claims – usually between $ 5,000 and $ 10,000, depending on the state – the case will take much longer and will be more expensive, O’Neill said. “Fees for filing documents will be higher, and the lender may have to hire a lawyer, as the traditional court system is more difficult to navigate without a lawyer.”

Even if you get a decision in your favor, it does not mean that you get your money back, says Nietzsche, “especially if the person who convicted him has certain types of protected income, such as disability or social insurance. This creates an additional wrinkle, because you can not get a side dish to the salary.

If you follow this path, 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?

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This column was provided by the Associated Press’s NerdWallet website on personal finance. Lauren Schwan is a writer at NerdWallet. Email: lschwahn@nerdwallet.com. Twitter: @lauren_schwahn.

RELATED LINKS:

NerdWallet: Pay Off Debts: Tools and Tips https://bit.ly/nerdwallet-pay-off-your-debt-tools-and-tips

Lauren Schwan of Nerdwallet, Associated Press

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