debt

When family skips out on a loan

Don TaylorDear Dr. Don,
More than a year ago, I loaned my sister and her husband $2,500. I am not happy about the loan because they are totally dissing me about repaying it. I wrote them a notice letter telling them to repay me or I will take them to court. Was it wise of me to do so? I cannot believe they didn't show me respect after all I did to help them.
-- Gloria Gripe

Dear Gloria,
I can understand your frustration. You lent your sister and her husband money with the expectation of being repaid, and they're not doing their part in making the loan payments.

If you don't have a written loan agreement, then you have some obstacles to overcome in taking them to court. In general, an oral agreement is considered legally enforceable if it meets certain conditions.

  • It must contain essential contractual terms.
  • The terms must be sufficiently precise to allow for enforcement.
  • All essential terms must be identified and not left to future agreement.

If you do have a written agreement, the loan agreement should speak to the options available to you when loan payments are missed. The notice letter you sent them may have been required by the loan document. If it wasn't, it certainly tipped your hand and showed them how displeased you are about their nonpayment.

According to Nolo.com, your $2,500 loan is within the limits of actionable claims in all 50 states, allowing you to pursue your claim in small claims court. You should check the Office of the Attorney General in your state to see if there are specific rules or exclusions. Some states, for example, require that you file within a certain amount of time of the last loan payment.

Before you pursue legal remedies, I'd like to suggest you have a heart-to-heart with your sister about the loan and the loan payments. It's possible that no disrespect was intended and they just weren't able to make the scheduled loan payments. Try to determine if they are willing and able to make payments. Keep in mind that winning in court may still require you to take additional action to get paid.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CREDIT CARD WEEKLY NEWSLETTER

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.

Debt Adviser

Charged-off debt still on me?

Dear Debt Adviser, If a debt is charged off, am I responsible for paying off that debt? -- Jenny Dear Jenny, Yes, oui, ja, da, si and dui. In any language, including good ol' American legalese, you must pay. But don't... Read more

advertisement
Partner Center
advertisement

Connect with us