Recovering family debt a delicate course

Posted Oct. 05, 2009, at 12:28 a.m.

Q. I have a family member [to whom] I have loaned $10,000. I have paperwork to back this loan, but it has been four years now with no attempt to pay back the money. What can I legally do to get my money that is owed to me? Thanks, any information would be helpful!

A. Your question does not say what your paperwork or documentation consists of, but you score points for at least attempting to record the transaction even though it was with a family member.

Ideally you would have consulted an attorney who would likely have prepared a promissory note, a document signed by both parties confirming that the money you were providing was a loan and not a gift, and that there was a clear expectation that it would be repaid.

A good note would also include terms of the repayment: when payments would be made, what interest would be charged, and the final deadline. Depending upon your relative’s creditworthiness, you might have also had some collateral pledged for the loan or even put a lien against his or her house, requiring payback when he or she sold the home.

While it’s always best to consult an attorney before entering into a loan agreement, if you haven’t, and the borrower has ignored routine regular payment dates such as every week or month, it’s better to consult an attorney quickly before a bad situation gets much worse.

A lot of managing things legally involves going step by step and documenting the steps as you go. In this situation, if a final deadline is coming up, it would be prudent to inform the relative in writing that the agreed deadline is looming and you are expecting payment.

Then if no payment comes through, you might inform the person that he is in default and that you are planning to take legal action. If that doesn’t stir the person to pay you, it really is time to talk to an attorney, who may still be able to resolve the issue without actually getting into court, saving hard feelings and embarrassment.

This column is a service of the Lawyer Referral and Information Service of the Maine State Bar Association. Its contents are a general response to the question and do not constitute legal advice. Questions are welcome. E-mail AAL@mainebar.org, describe your question and note you are a BDN reader. Written questions mailed to “Ask a Lawyer,” Bangor Daily News, P.O. Box 1329, Bangor 04402-1329 will be forwarded to the LRIS.

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