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When a friend asks to borrow money it can be difficult to refuse. We don't think twice about saying no or hanging up to telemarketers that want us to part with our money, however when it's someone familiar that is asking, your usual good judgement can quickly disappear.
But if after you have given the loan, your trusted friend disappears just as quickly, then you've now got a dilemma. This scenario is unfortunately all too common, with payment service Paym finding that over 12 million people in the UK admit to having fallen out with friends or family over money. Just under a third of these instances were from lending money to friends of only up to £100. But after repeatedly asking your friend for the money back, being reasonable and understanding of their circumstances but ultimately being left out of pocket, how can you get money back from someone who borrowed it? Can you actually take your friend to court? How can you prove you are owed the money?
Before involving the court you need to think about your prospects of success. You'll need to have some kind of evidence that you lent the money in the first place and that your friend hasn't paid you back.
If you've got a signed contract, loan agreement or IOU then that's ideal, but the evidence of the loan doesn't always necessarily have to be written. A legal contract can be verbal if it was just an arrangement you discussed and agreed between yourselves, however there still needs to be something that a court can see, like:
Does your friend actually have the money to repay you?
You can't get blood from a stone, so if your friend has no cash or assets then there may be little gained from taking them to court. It will cost you money to issue the claim and you'll rack up further fees to enforce any judgment from the court (bailiffs etc.) to perhaps end up with nothing or very little.
But if your friend is employed, owns a car, has equity in a house or some other assets that would cover the debt then it's reasonable to assume that you can make a recovery from them by going through the courts and obtaining a County Court Judgment (CCJ) against them. 
How to get money back from a friend."Nearly 2 out of 5 people admit they don't always pay friends back, and one in ten say they have avoided paying money back to family on purpose." - Research by Paym  Not getting paid back can be frustrating
If you've secured evidence of you making the loan and believe your friend has the means to pay you back, then it's time to start getting serious. Sometimes the realisation that you're willing to take the matter further can snap your friend into action.
First step is to write a simple (but formal) 'Letter Before Action' which gives your friend a final chance to settle the debt before court proceedings are started. As a minimum your letter should include:
Keep a copy for yourself and send the letter in the post to their home address, or where they are currently living. The best outcome is that your friend pays you back or at the very least you agree a payment plan that starts to recoup the loan. That way you avoid court costs and will eventually get your money back. If your friend subsequently fails to comply with the payment plan then at least you'll have further evidence to help with court proceedings. Also if you want to add additional weight to your claim, you can get a solicitor to draft and send the debt letter which should only cost around £50.00. Taking friends or family to the Small Claims Court.
The last resort in recovering your money is to take your friend to court. This is normally done through the small claims court (for amounts up to £10,000) and will involve you completing some paperwork, submitting it to the court and paying a court fee.
Instructions on how to make a claim can be found on the Gov.uk website. Straightforward claims are able to be done on your own with a little time and effort, but can get complicated if the claim is defended, interest is able to be added or bailiffs need to be instructed etc. As such depending on the amount, it may be wise to instruct a solicitor to handle the claim who should be able to do this for a fixed fee plus disbursements (the court fees). Some of your legal costs can also be recovered from the debtor as part of your claim. Remember getting money back from a friend, an ex-partner or family member can be complex and emotional process, so having your lawyer deal with the proceedings and ongoing contact with the debtor may help in the long run. "Before borrowing money from a friend, decide which you need most"
Being owed money by a trusted friend who won't pay you back is never a good situation to be in, and how you proceed will likely be determined by how much you want to maintain the friendship.
If your friend is in real financial difficulty then piling on court proceedings may not help them or their family, so you may want to consider the full impact of taking matters further. But this is a judgement and a financial call that only you can make. It is also worth noting that you generally have six years to start legal proceedings to recover a debt. You should never feel guilty about pursuing money owed to you which you lent in good faith. Remember if anyone has jeopardised your friendship it's a friend who has decided to stop paying and communicating with you.
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May 2024
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