What Can You Do

Legally When
Someone Owes You
Money?
Camila Lopez - Breach of Contract - September 24, 2023

People Clerk can create a free letter to help you get

paid back.

CREATE LETTER

Contents

1. Send a Demand Letter

2. Can You Go to The Police If Someone Owes You Money?

3. Using Empathy As a Way of Getting Paid Back

4. Ask For Repayment Directly

5. O"er a Payment Plan

6. Brainstorm Together Other Creative Ways to Get Paid

Back

7. Think About Going to Mediation

8. When All Else Fails, Consider Going to Small Claims Court

Did you loan money to someone and haven’t been

paid back? When someone owes you money and won’t
pay, you are put in the di!cult situation of playing "debt
collector."

In this article, we review what to do when someone

owes you money and refuses to pay, what your out-of-
court options are for getting your money back, and
what you should consider when thinking of escalating
the situation and suing someone in small claims court
to get your money back.

Send a Demand Letter

A demand letter is a formal letter that requests
repayment.

A formal letter to someone who owes you money has

the following benefits:

They take you more seriously with a letter. A letter

tends to show you are serious about getting your
money back. Usually, a letter symbolizes you are
putting things in writing before escalating the
issue.
Sending a letter is a low-cost, low-e#ort way to
get your money back. The person who owes you
money may decide to pay you without you having
to take further action and spend more money.
It may clarify a situation that arose out of
miscommunication. Writing out what happened
and why you are requesting to get paid back, may
clarify to the other party what happened.
In some small claims courts, you are required to
ask for payment before suing or a judge will
want to see evidence of this. For example, in
California small claims court, you are required to
first request your money back before you can file
the lawsuit. While you can request your money or
property back orally, it is suggested you do so in
writing in the form of a demand letter.

Unsure of what to include in your demand letter?

Here are a few suggestions:

How much money you are owed.

When you lent them the money.
Your contact information.
Where to send payment.
Option to pay using a payment plan.
Option to mediate.
Give them a few days to respond (usually about 14
days).
Let them know that if they don't respond, you
intend to sue.

Did you know we have a free tool powered

by AI that helps you create a demand
letter? Check out our demand letter tool.

Can You Go to The Police

If Someone Owes You
Money?
You may go and report this matter to the police but they
will probably tell you it is a civil matter and they can’t
handle it. Unless the matter also involves violence or an
immediate threat there is really not much that the
police can do for you if someone owes you money on a
loan.

More likely, the police will direct you to sue them in

court, and depending on the amount you are owed you
can file the lawsuit in small claims court.

Using Empathy As a Way

of Getting Paid Back
What should you do when the person that owes you
money is a friend or someone close to you? If the
person that owes you money is a friend, family member,
or someone you are close to, try to influence them to
be more empathetic with what you are going through.
You trusted them to pay you back after you lent them
money. You may not have been doing so well yourself
but knew they needed the money more than you did.
Show them and explain to them how you feel.

Here are some examples:

You lent your friend money to buy a car so she

could finally drive to work. You are now struggling
to pay your bills because you were expecting her
to pay you back by now. Show your friend your
unpaid bills or any debt collector notices.
You lent your co-worker money to pay the bills
for a baby he was having. You are now struggling
to pay for your own kid's daycare. Show and
explain to your co-worker that you are having
trouble paying for daycare because they haven't
paid you back.
You lent your cousin money for gas so that they
could go to work. Your job laid you o# and now
you are struggling to get o# your feet. Tell your
cousin what you are going through as they have
also been in the same situation.

If they are able to empathize with you, they will

understand why you need to get paid back quickly.

Ask For Repayment

Directly
Maybe you haven’t heard from the person who owes
you money in a while, call them to see how they are
doing and what’s going on. As you are catching up
remind them about the loan and the agreement they
made to pay you back within a certain time period.

Empathy will be a good tool here as well, so don’t

forget to tell them what you need to use the money for,
especially if you have immediate expenses to pay.

Offer a Payment Plan

If you lent someone $1,000 and told them to pay you
the $1,000 back once they had the money it may be
hard for them to come up with the $1,000 all at once.
Let the person know that they can pay you back $50
per week until the full $1,000 is paid for.

It is much easier for someone to pay in installments

than a lump sum payment. It is also a good idea to ask
them how much money they feel comfortable paying
and when. If they say, I can pay you $100 every 15th of
the month, then it was their idea how much they could
pay you and when. It is easier to get "buy-in" from
someone when it is their idea.

Brainstorm Together
Other Creative Ways to
Get Paid Back
You have tried to talk to the person who owes you
money about them paying you back but you are not
making any progress. Now what? Ask them to sit down
with you and brainstorm ways that you can be paid
back the money you loaned them. As we mentioned in
the previous section, it is easier to get "buy-in" from
someone when it is their idea and a brainstorming
session may stimulate some good ideas.

How to ask them to brainstorm ideas? Tell them, "Look

I understand you can't pay me the money I loaned you,
but I would love to brainstorm ideas on how we can
cancel this debt."

Write down all the ideas. It is really important to write

down all the ideas that you both come up with. As you
are brainstorming, agree not to comment on any ideas
until after you have exhausted all options. Commenting
on ideas you are putting down on paper during the
brainstorming session may discourage the other person
from o#ering other ideas based on your comments
from the first ideas.

Review the ideas for repayment. Once you are done

brainstorming the ideas for repayment, take a moment
to read them out loud together. Go through each idea
and tell each other what you think about each idea. You
can go over any pros or cons of each idea.

Here are some examples of creative solutions on how

to get someone to repay the money you lent them:

You lent money to a friend you know loves and

makes the best BBQ and your birthday is coming
up. Instead of having them repay you the money
you lent them, have them cook your next birthday
meal.
You know you really need your garage to be
cleaned out and it is going to take you the whole
weekend to clean it out. Ask the other person if
they are willing to clean and organize your garage
and in return, they don't have to pay you the
money they borrowed.
You need to find someone to take care of your
dog while you have to be out of town. You know
the other person loves dogs and would take care
of your dog as if they were their own. You know it
is going to cost you a lot of money to have
someone take care of your dog. Ask the other
person if they can take care of your dog while you
are out of town in exchange for the money you
lent them.

Think About Going to

Mediation
What is mediation?
Mediation is a meeting between you, the person you
lent the money to, and a neutral third party called the
mediator. A mediator is not going to force you and the
other person to come to an agreement and is not going
to determine who is right and who is wrong (that is what
judges do).

A mediator is going to help you and the other person

come to an agreement together on how to resolve the
issue at hand. The mediator is there to facilitate
conversation between both you and the person that
owes you money, this means the mediator is going to
help you talk to each other without interruptions.

Benefits of mediation:

The mediator will help you brainstorm solutions

on how the other person will repay you for the
money you lent them.
The mediator will make sure you are not talking
over each other and that the conversation
remains respectful.
Sometimes having an outsider's perspective will
help you see a situation di#erently.
It is less intimidating than going to small claims
court for money owed.
You may be able to be repaid quicker than going
to court especially if you and the other person
come up with ideas on how they can repay you
for the money you lent them.
Mediation tends to be very successful between
people who have a longstanding relationship and
a relationship that will likely continue for the
foreseeable future.

How Can I Try to Mediate With Someone Who

Owes Me Money?
In most states, there are many organizations that
provide free or low-cost mediation. Run a google
search for "mediation near me" and you will find one of
the many organizations providing mediation. Many
times they are run by volunteer mediators.

Many small claims courts also have free mediation

available or as part of the small claims process. Check
with your local small claims court about mediation to
see if your case can be mediated before the hearing.

When All Else Fails,

Consider Going to Small
Claims Court
Really often we get the question, well can I sue
someone I lent money to in small claims court? The
answer is yes, so long as the amount you want to sue
them is within the small claims limit of your local small
claims court. For example, in California and in New
York City, you can sue someone who owes you money
in small claims as long as that amount is $10,000 or
less.

You also want to make sure you are suing someone for
money you lent with the expectation that it would be
paid back and not over a gift. Legally if someone owes
you money, this means it was a loan from you to them
and there was a clear expectation that there was a duty
to pay the money back within a certain amount of time.
If this information is in a contract or written agreement
this will be more helpful in court, but you may be able
to provide other evidence like emails, texts, money
transfer receipts, etc.

Here are some examples of common small claims

lawsuits against someone who owes money:

You lent your ex-boyfriend money for bills, rent,

food, and gas. They promised to repay you in a
few months once they received their first
paycheck. Months passed and they keep saying
they will pay you back the next month. You
decide to sue them in small claims court for all
the money you sent them via Venmo.
Your friend borrowed money for you to pay a
security deposit on a new apartment they were
renting. They promised to pay you back as soon
as they got their security deposit back from the
old unit they were renting. It has been 6 months
and you have not heard back from your friend.
You decide to sue them in small claims court for
the money they borrowed from you.
You lent your co-worker money to buy a car.
They promised to pay you back, but they show up
to work every day and they are ignoring your
requests to get repaid. You decide to sue them in
small claims for the money you lent them for the
car.

Learn about how to sue someone for money owed in

small claims court.

Camila Lopez
Chief Legal Architect & Co-Founder @
People Clerk. Camila holds a law
degree and is a certified mediator. Her
passion is breaking down complicated
legal processes so that people
without an attorney can get justice.

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