debt

Pay friend's debt as a gift, not a loan

Steve BucciQuestionDear Debt Adviser,
My best friend has a problem with a lawyer representing a credit card bank, trying to collect on a debt. I have a credit card with this bank myself, but I have never had any problems. ... But anyhow, I'm going to help my best friend by paying what debt he owes because it is not that much. If I pay them, are they going to send me something so that I can pay them? How should I pay them, at least to get documentation or a receipt?
-- Roberto

AnswerDear Roberto,
I can understand you wanting to help a friend. That's what good friends do. However, the fact that the amount is "not that much" should not be the only factor in your decision to pay your friend's debt. I'd like you to consider several other things before you make the payment.

First, paying the debt may ruin your friendship. Money has a way of eroding even the best relationships if given half a chance. For example, you may end up resenting your friend if he continues to mismanage his money and requests your help in the future. Your friend may regret allowing you to help and feel a sense of obligation to you or humiliation that he would rather not feel.

Second, consider whether paying your friend's debt will actually solve the problem or if this debt is just a symptom of a larger financial issue for your friend. In other words, by paying the debt, will you be helping him to put a Band-Aid on conduct that may become a more serious problem?

Third, remember that no good act goes unpunished. I have seen people cast as the Antichrist because they seem to have more than their share of money or luck. More than one's share can mean any amount the other party doesn't have. Jealousy is not limited to matters of the heart or the opposite sex.

My advice is not to do it. You can be a good friend by just listening to your buddy and offering advice if asked. If you aren't asked, I'd just say nothing except perhaps how unfair life is or that owing more money than you can pay is such a pain. If he does ask for advice, invite him to look into a budget that allows him to save some money, have some fun and still meet his obligations.

However, if you decide to go ahead with your plan to pay the credit card debt, I recommend that you consider it a gift and not a personal loan. Dream up an event if you need to. A half-birthday, anniversary or one of the lesser-known summer holidays such as Canada Day, Friendship Day and the ever popular National Aviation Day. If you make this a gift, there is no need for a receipt. Just give the dough with your rationale for the largesse.

If you take none of my advice to either forget the whole thing or make him a gift of the money, then go ahead and ask your friend to get some type of document from the lawyer stating the specifics of the debt, including the original creditor (the bank issuing the credit card) and the amount owed. Once you have verification of the amount due in writing, send a check to the address given for payment. Include a copy of the document verifying the debt and send it certified mail, return receipt requested. The certified-mail receipt and the bank records for your check will provide you with the documentation needed to prove the payment was received and the debt paid.

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