You may think of debt collectors as heavyset men with crowbars but the reality is that there may come a time where you are required to collect debt too. Maybe you lent your sister some cash to cover the cost of a new set of brake pads for her car? Maybe a friend needed to buy an engagement ring and you loaned him the money so he could marry the girl of his dreams?
While you may have had the best intentions, people you know can let you down by not paying back their debt and, often, completely avoiding you as a consequence. In this article, we’ll look at your rights as someone who is owed money, and how to successfully deal with a friend or family member who won't pay you back - without harming your relationship. And, if you need access to cash because you loaned family and friends all your savings, you could consider applying for a Personal Loan today.
Collecting debt yourself
The best way to collect debt yourself is to create a contract or promissory note before you lend the money. The contract or promissory note should specify the sum borrowed, any agreed interest you will be charging and the repayment terms. That way you’ll know where you stand and if your friend or family member ever refuses to pay you back, you have a legally binding document to use as evidence.
If the person who owes you money is late on a payment, first remind them politely and ensure that your request is in writing, either by email or in a written letter. Although you may be irritated or angry, it always helps to be polite and respectful in your tone and manner so that you don’t upset them. Perhaps your debtor has a legitimate reason for not paying you back and it will help both parties if you can get to the bottom of this. If they have come up against hard times, it might be necessary to devise a payment plan that they can manage. Meet your friend or family member halfway by changing the amount owed or by extending the time frame in which they can pay you back. Instead of paying you back R5 000 in one go for example, maybe they can afford to pay you back R500 each month for 10 months? This could go a long way to ensure that you still have an amicable relationship with the friend or family member that owes you money.
If none of that works and you believe your friend or family member does in fact have the money, then try something different. If you see them regularly on a social level, then when you’re out for your next meal together, remind him or her at the end of it that they still owe you money so they should settle the bill with the restaurant. You could keep doing this until they have paid back their full debt.
If none of these strategies work, then it might be time to use a professional debt collector or approach the Small Claims Court.
Using professional debt collectors
Getting a professional debt collector on board increases your odds of getting paid, mostly because they’re more persistent than you would be. You also have a personal relationship with the debtor, which could make things awkward, whereas debt collectors are simply people doing a job and for this reason there are no emotions involved.
Chasing debt is also time consuming, so having someone else doing this will free up your time for more important things. Debt collectors also have tools that you don’t have at your disposal, like third-party sources that give them access to information about the person who owes you money.
The disadvantages of using a debt collector are that they can be expensive and you therefore end up losing out on some of the money you’re owed. Employing a professional could also destroy the relationship you have with the friend or family member, as they may feel embarrassed or threatened when confronted by one.
The Small Claims Court
The Small Claims Court lets you institute civil claims in a quick, simple and affordable way, without having to use a lawyer. For many debt collectors, heading to the Small Claims Court will be your last resort. The amount you are claiming must be less than R15 000 and if you are a minor (i.e. under 18) you will need to be represented by an adult.
There is no point in laying a claim if the opposing person (i.e. your friend or family member) is unemployed and unable to pay you back, so check this before you start proceedings. The first step is to contact the opposing party in writing and tell them about your claim and that they need to pay you back the amount. You could also consult an attorney and have them write a letter to the debtor. The letter of demand should state the details of your claim and include a warning that you will consider legal action if the money owed to you is not paid back by a certain date. A letter of demand from a lawyer shows that you are serious about getting what you’re owed. If they don’t respond (and pay you back) after 14 days then you need to report to the clerk of the court and present evidence that the written demand was received, such as a post office slip. Consumers can also contact the Small Claims Court prior to the initiating process to request a standard template of the letter of demand and other process documents.
Take along any contract you may have with the person you lent money to and present that as well. You also need to supply all of their contact details. The clerk will then issue a summons and you’ll be told the date and time of your case. You’ll need to present the summons to the opposing party in person and ensure that they sign for the document.
For your hearing at the Small Claims Court, you must appear in person and take all the relevant documents with you. Prepare what you want to say to the commissioner of the court simply and succinctly. After both sides have presented their case, the court will pass judgement and you’ll be expected to abide by its decision. If things don’t go your way, you may be asked to pay any costs the opposing party may have incurred.
Preserving your relationship
Many issues involving money between friends or family lead to difficult situations, conflict and ultimately relationships that are negatively affected. All in all, it’s usually best to avoid lending money you can’t afford to lose to people you know. Rather offer to help them with their finances and come up with a saving or budgeting strategy together. If you have lent them money in the past and they have not paid you back, then under no circumstances should you do it again. You could also suggest that they take out a Personal Loan if they are in desperate need of money in the short term.
If you do have to resort to alternative forms of debt collection, like using a professional debt collector, or going to the Small Claims Court, try and keep things civil at all times so you can preserve the relationship as best you can.
The views expressed in this article do not constitute legal advice and is merely for informational purposes.