What should you do if a friend owes you money? Perhaps you took out a loan or bought something with your credit card for them because you had a better credit rating. Or perhaps you just lent them the money. And now they aren’t repaying you.
It would have been better to have thought all this through BEFORE lending the money… research has shown that nearly a third of people have fallen out with a friend or family member over an unpaid debt of £100 or less.
Before you take legal action, you need to consider two things:
- are you likely to win your case?
- does your friend have any money?
This article looks at whether it is sensible to take legal action and how you would do it in England or Wales. If you live in Scotland or Northern Ireland, the small claims processes are different – contact your local Citizens Advice office to find out about them.
Can you show you are owed the money?
To win a case, you need to have some evidence that your friend owes you money. This doesn’t have to be a written legal contract, with witnesses etc. Suing someone for money is a civil case and the judge will decide who wins “on the balance of probabilities“, looking at whose story seems most likely.
You can have a valid legal contract if it was just a spoken agreement between the two of you. But there does need to be something you can show. If you gave your friend £200 in cash and no-one saw you do this, you are going to have problems with this part…
If your friend denies you ever gave them the money or whatever you bought on their behalf, is there someone who was there when you discussed the loan? Do you have an email from your friend saying they are broke and could you help them out? Was the sofa delivered to your friend’s house not yours? Does your bank statement show a transfer to your friend’s account?
If the friend started making some repayments but then stopped, if these show in your bank account or if the friend was making the repayments on your credit card, that is good evidence that there was some sort of loan.
If you aren’t sure whether what you have is going to be “good enough”, then you could go to your local Citizens Advice Bureau and see what they think.
Was it a loan or a gift?
If your friend says the object was a present, does this seem plausible? Friends don’t usually give each other furniture or a car for Christmas.
But partners do give each other gifts, sometimes expensive ones. And parents may give a child a large sum as a deposit for a house.
If a gift seems plausible, again the key facts in a court deciding between a loan and a gift are likely to be whether there is any written evidence that the money was expected to be repaid and whether any repayments have been made. See this newspaper article My ex says he will take me to court if I don’t pay him back thousands of pounds he gifted me to buy a new car – where do I stand? which looks at one case.
Can your friend really afford to repay you?
If your friend has no money or assets, there is little point in taking them to court. Suppose you win the case – your friend now has a County Court Judgment (CCJ) but they may still not give you the money. They could apply to the court and offer you £5 a month say, which the court will agree to if they can prove it is all they can afford. Or they could just ignore the judgment!
If they have a house with a lot of equity, or a car that is worth something – not one bought on car finance – or a well-paid job, then there are ways that you can “enforce the court judgment” and get the money that you are owed, but these will:
- all cost you money;
- some, such as bailiffs, may well not work; and
- getting a charge over their house will not get you the money until it is sold. It is very, very rare to be able to force someone to sell their house.
This is a really hard decision to take because it feels so unfair. But if your friend is in financial difficulty, getting a CCJ is very probably pointless. You will have wasted the court fees and not gained anything.
A more practical alternative may be to be sympathetic to your friend’s problems and ask them if they can pay you a small amount every week or month. Something is better than nothing…
What if you don’t know where your friend is?
If your friend seems to have moved, isn’t answering your calls and no-one knows where they are, this is very bad news. You can still sue them using their last address and win the case.
But that doesn’t mean you will get any money! If you don’t know where they are your chance of being able to “enforce” the court judgment are close to zero. The courts aren’t going to help you locate someone, nor will the police.
There is simply no point in pursuing this unless there is a lot of money involved, you have a very good case AND you know they have a lot of assets. Often the best you can do is assemble all the evidence you would have produced in court about the debt and keep it in a file, in case they reappear.
How do you sue someone?
Citizen’s Advice has a good guide about this.
The first step is to try to sort it out before going to court. You need to send your friend a “letter before action”, there is a template in the Citizens Advice guide. This letter needs to be posted and you should keep proof of posting.
It needs to give your friend a set period, usually a couple of weeks, to reply. This may seem frustratingly slow if you think they are going to ignore it, but it has to be done.
Sometimes a formal letter makes someone see sense and come up with a proposal for repayments. If they say they will repay say £30 a month, unless you are sure they can afford more, it might be wise to accept it rather than risk going to court.
After that you need to put in your “claim”. This can be on paper but it is most easily done using the Money Claim Online (MCOL) service. You shouldn’t need a solicitor to do this, but your local Citizens Advice can help if necessary. There will only need to be a court hearing if your friend decides to defend the claim.
What does it cost?
If you sue someone you have to pay court fees at the start. The amount depends on the amount of money you are claiming and how you start the case. Issuing a claim for up to £300 costs £25 if you are using the on-line service or £35 if you use paper forms. There will be extra charges if there is hearing or if you need to try to enforce the judgment. You may be able to get help with these fees if you are on a very low income.
In theory you will get your costs back if you win as they are added onto what your friend owes. But this may not work if you don’t know where they are or they simply ignore the judgment.
Can I sell my debt to a debt collector? No, debt collection agencies would not be interested in buying this sort of private debt.
Can’t the police sue them and get my money back? No, the police will tell you this is a “civil” matter, not a “criminal” matter. They will probably suggest you go to your local Citizens Advice – which is a good suggestion!
What about money someone owes me outside the UK? Sorry, I have no idea. You need to take local advice.