I left a friend borrow a large sum of money, now they refuse to pay. What options do I have to have them pay me back?
1 Answer from Attorneys
You leave out many details. When was the loan made? How much was loaned? Did they sign a promissory note? How was the loan to be repaid - in a lump sum or in installments? If in installments, what interest rate was assessed if any? Was any portion of the loan repaid? If there is no promissory note, then do you have anything in writing which evidences that this was a loan rather than a gift? Has there been any written demand for repayment?
If the loan was made to a PA resident in PA, any action would be governed by a 4 year statute of limitations. The statute generally begins to run when the right to sue could have been maintained. In the case of a promissory note, that would be when the first payment was due and not made. In the case of a demand promissory note, that period is generally after the first written demand is made.
What I would suggest is that you send a letter to the borrower, reciting that the loan was made (set forth amount and when it was made and the terms of any repayment). Recite that repayment has not been made. Demand that the loan be repaid. You may want to offer a discount if payment is made in a lump sum. If they want to make payments, how much will you accept per month and can they afford to pay per month? If you are not sure, invite them to contact you to discuss repayment arrangements. As an aside, make any repayment arrangement contingent upon them signing a written promissory note that sets forth the payment amount and a reasonable rate of interest on the loan. Require them to make payment arrangements or make a lump sum payment within 15 to 30 days. Send the letter via UPS or FedEx. People are playing games with certified mail and will not get the letter. They can't do that with UPS/FedEx. If they fail to respond, at least you will have something on record in writing.
You should then go a civil litigation attorney in the county/state where your soon to be ex-friend lives to discuss possible suit. If you have nothing in writing at all it will be difficult to prove that you made a loan rather than a gift. You may be able to sue in small claims (magistrate's court) provided that the amount is below $8,000. If it is over $8,000, then many counties have a mandatory arbitration of claims under $25,000 or $50,000 (some larger counties raised the limits). If you loaned more than these amounts, then you definitely will need a lawyer.