How to get someone to pay you back without going to court

Does a tenant owe you rent? Does your boss owe you wages? You loaned money to someone and he/she did not pay you back? Pursuing people for money that belongs to you can be irritating and time-consuming. One way to recover your money is to sue the person or company owing you money (also known as a debtor), but this is generally the most expensive way of resolving a dispute. Before going to court, it is worth considering alternatives such as issuing a ‘letter of demand’ to the debtor, and mediation. In this article, we will explain to you the initial steps in your journey to recovering your debt.

Table of Contents Show

Letter of demand
Statement of claim
1. Understand the Dynamics
2. Remind Them About the Debt
3. Send a Letter
4. If All Else Fails, Get Your Lawyer to Write a Letter
5. Make Sure the Lawyer’s Letter Goes Out
6. Go to Court

Letter of demand

A letter of demand is exactly what it sounds like. This document is addressed to the debtor and contains your demand for money which belongs to you. The most effective letters are succinct and can include the following:

The amount owed to you in dollar value;
A copy of the invoice which has not been paid or a copy of the contract that has been breached;
The deadline for repaying the debt (usually within 7 days of the date of the letter);
The method of repayment (e.g. electronic funds transfer, cheque or cash); and
Your intention to sue the debtor if the debt is not repaid.

Take the time to ensure that you have correctly identified the debtor or debtors including address and email. You also want to make inquiries about the debtor’s assets and ascertain whether or not the debtor can satisfy your debt. If you would like an effective letter of demand to be drawn up, feel free to contact our team.

Mediation

Another affordable way to resolve a monetary dispute is through mediation. It involves the parties, usually with their lawyers, attending a meeting with a mediator trained in settling disputes. At first, the mediator meets the parties and their lawyers altogether, at which each side makes an opening statement of their position, followed by some negotiation. At this stage, you want to find out why the debtor has refused to return your money. Next, the parties and their lawyers are placed in separate rooms, while the mediator moves between each room, presenting offers of settlement, and trying to bring each closer to the other’s position.

Attempting mediation is generally expected by judges before court proceedings begin.

The NSW Community Justice Centres and NSW Small Business Commissioner offer cheap mediation services.

Statement of claim

If the two options above are unsuccessful, then you can consider filing and serving the statement of claim to the debtor. The statement of claim is a written declaration by you, the creditor, containing the facts that are to be relied upon to a support a claim against the debtor, and the relief claimed. It can be an effective way of bringing the debtor to the negotiating table. However, this pathway is costly and can take many months before a trial takes place. If you do go to trial and obtain a judgment in your favour, you can legally force the debtor to repay you.

For debt up to $100,000.00, the statement of claim would be filed in the Local Court.

For debt between $750,000.00 and $100,000.00, the statement of claim would be filed in the District Court.

For debt greater than $750,000.00, the statement of claim would be filed in the Supreme Court.

Conclusion

Therefore, there are various options available to recover your money, and we recommend that you try resolving the dispute outside of court first. Issuing a letter of demand and attending mediation are not only cost-efficient, but they are also short in duration and have a relatively high success rate. If you need any assistance with drafting an effective letter of demand or need legal representation, please contact our team.

Disclaimer: This publication is general information only and does not purport to provide legal advice. We do not accept responsibility for any losses for reliance upon this publication.

When someone owes you money, you can quickly find yourself in the personal debt collection business even though you don’t want to be.

There are so many companies out there helping people escape their responsibilities. I figured it was time to help you make sure nobody skips out.

After all…you loaned money to somebody – they promised to pay you back. You lived up to your side of the bargain – they didn’t.

Before trying anything else, offer them a debt payment plan. If that doesn’t work, take these steps to start collecting money you are owed:

1. Understand the Dynamics

The person who owes you money has broken his/her word. They’ve broken a boundary – not you. Don’t worry about being nice. Don’t worry about what they think or say about you.

The facts are that you did someone a favor and they’ve taking advantage of you. Get a little angry and stay that way. You are no longer friends and nothing you or they do from this point on is going to change that.

This doesn’t mean you have to pull out the heavy artillery. There are plenty of ways to collect without hiring an attorney.

2. Remind Them About the Debt

Remind them of the circumstances. They asked about borrowing money…not you. They asked for a loan and you gave it to them.

Remind them what they promised to do. Be specific about the amounts and dates they agreed to.

Ask if you have it right or if you’ve made any mistakes about the date, the amount or the promise. One of three things will happen:

A. They’ll pay you right then and there – this happens about as often as politicians live up to their promises, so don’t hold your breath.

B. They’ll agree and recommit to pay you. In this case, get them to sign a letter of understanding.

C. They’ll use their selective memory skills to reconstruct the arrangement. They’ll say you gave them a gift or made an investment or whatever. They might even start being rude to you.

If that’s the case, don’t confront them. Just let them know that they are responsible to pay you and you are going to collect. Don’t give them a chance to respond. End contact at that point.

Neal’s Notes: Here’s a novel idea. If your dead-beat debtor is half-way motivated, gently suggest that they refinance their debt. There are three ways people can and do move their debt around and if your debtor takes advantage of this, you’ll get your money back faster. Yes!

3. Send a Letter

Write a letter recounting the date of the loan, the amount borrowed and any other facts regarding the transaction. This should include the repayment terms that the debtor promised to make.

In this letter, you should demand that the person who owes you the money live up to their promises. Tell them how much you expect to be paid and when.

Whatever you do, don’t get emotional. If you want to talk about your feelings, tell a friend or a therapist. The time for warm and fuzzy talk is over with this person. The letter should be cold and dry. The facts…just the facts. Be brief and very specific.

Send this as a certified letter and demand a response within 10 days of receipt.

4. If All Else Fails, Get Your Lawyer to Write a Letter

If your deadbeat former friend doesn’t respond favorably by the time you stipulated, it’s time to call out the artillery.

Call a local lawyer and get them to give you a quote for sending your “friend” a letter.

Give the letter you already sent to your attorney and make sure the lawyer rewrites it in her own words.

Make sure the lawyer sends the letter certified and gives you a copy.

Before you hire the attorney, get a firm price quote. Make sure the time and expense is worth it.

As a rule of thumb, the expense should be less than half the amount you want to collect.

5. Make Sure the Lawyer’s Letter Goes Out

The letter must demand payment with a specific amount and date. If you don’t receive the payment, send a copy of the lawyer’s letter again. Like the first, send this letter certified.

6. Go to Court

If the deadbeat doesn’t pony up by this time, go to court and file a small claim. You may be able to recoup your costs – ask the attendant at the court.

If the person who owes you money isn’t a complete dunce, he’ll see that you are serious about collecting the money you are owed and make a good effort to pay up.

Just by seeing how organized and committed you are, he may get his act together.

The one last step you might consider is working with a collection agency. I haven’t ever had this experience, but I bet it would work pretty well.

BONUS TIP

Next time somebody comes to you looking for a loan, send them to a peer-to-peer lending group rather than the Bank of You.

Have you ever gone through a process like this? Have you ever collected on a personal loan from a “friend”? How did you do it? Was the friendship able to survive?