Collecting personal debts from family

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This is a tough one. No matter how you approach it, collecting debt from a family member could result in some serious tension and a long-term family feud. If you've ever been in this situation, you may find yourself wishing you'd never lent your loved one money in the first place, but that in itself can cause conflict, so what are you to do?


There are a few ways to deal with this issue but perhaps avoiding it to begin with is the best course of action in the future. For example, you could help your loved one to compare personal loan quotes online or guide them to a reputable debt counsellor so they can overcome their financial woes for good.


However, if you are stuck with a family member who owes you money, here are a few ways you can try to get your money back.


Sign a contract


Whether or not the loan is substantial relative to your own financial situation, it's a good idea to draw up a written agreement between yourself and the person borrowing money from you. Not all contracts are automatically legally binding and accepted in a court of law. However, an agreement with dated signatures is proof of intent and understanding that you require the loan to be paid back within a certain time frame, along with any interest you may charge the borrower.


Send a letter of demand


You can send the person a letter of demand for the outstanding amount. However, before you start on this path, there are a few things you should keep in mind.


Write the letter of demand as if it will be read by an attorney or judge. Include a brief description of the situation, how it occurred, and why it hasn't been resolved. The tone of the letter, as with any other communications you send to the borrower, should be polite and professional at all times. Avoid threatening someone over lack of payment; it could be counterproductive because the person may be less inclined to repay you, and the law does not look kindly upon threats. Keep it short and sweet, no more than 350 words. There is no word limit but succinct letters are more likely to be read and understood. Here's a helpful guide on the dos and don'ts of writing a demand letter.


If the person ignores the letter of demand, your next step will be to get in touch with an attorney to assist you in getting the money back, depending on how much is owed to you. This can be expensive though, so consider whether or not the legal fees will outweigh the amount owed to you.


You should also bear in mind that once you've sent a letter of demand, it may cause relationship tensions to skyrocket, so think carefully about whether or not it will be worth it before you start this process.


Go to the Small Claims Court


When you've tried everything and they've still not repaid the money, you can approach the Small Claims Court if the amount you lent is under R20,000. This court exists to settle disputes involving smaller amounts of money. It's a cost-effective means of getting money back because you can represent yourself in court; you don't need to hire an attorney. There are clerks at the court who can assist you with filling in the correct forms and give you advice about how to follow the process for a successful outcome.


While it's not easy to turn down a loved one who is asking for money, sometimes it's the best course of action over the long term, especially considering all the financial help that's out there. offers comparative quotes for a number of financial solutions, from borrowing to saving to counselling, so no matter what your loved one needs, there's a solution out there to assist them in finding an end to their financial woes.


Sources: Legal Zoom; Business Insider


Prices quoted are correct at the time of publishing this article. The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.

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