When you are owed money, hindsight can be a wonderful thing.

All too often in the rush to complete a business transaction or lending money to a friend in need, you won't think to put in place a legally binding agreement that formalises the arrangement beforehand. After all, you have every intention of holding up your end of the deal and so assume the other party will too.

But if payment doesn't happen and your previous agreement starts turning into a dispute over what is owed, you may need to consider what legal avenues are open to you to get your money back.

The success of any legal action will then depend on what evidence you can provide to show that the debt is owed.

Yes, but the 'burden of proof' will be on you as the Claimant to show that the amount you are claiming is due. Court should be your last resort in attempting to recover your money and so you should be confident that you have a strong case, sufficient evidence and follow the set pre-action procedure prior to issuing a claim (e.g. sending a letter before action, attempting negotiation etc.)

Ultimately the decision on who owes what will be down to a judge's ruling based on:

1. The applicable law (i.e. breach of contract)
2. The evidence that you can provide
3. The evidence supplied by the defendant/debtor
4. The balance of probabilities

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In the absence of a written contract or agreement being in place, there are various other pieces of information that you may be able to secure which can provide evidence that the money is due.

Bounced cheque or returned direct debit
While the use of cheques is diminishing, hundreds of millions of cheques are still issued every year. If your debtor has sent you a cheque that bounced or agreed to a direct debit that has been returned, it is often all the evidence that you need to prove a debt is owed.

In law a cheque is considered a 'promise to pay' and so can be used as a clear admission that money is due.

Unpaid invoices
It is not uncommon for a business to invoice without a contract. Most businesses use invoices to request payment so providing copies and proof of them being issued to a customer or supplier will go a long way in proving that a debt is owed, even if they aren't directly attached to Terms of Business or a contract.

Furthermore, if you provided regular statements of the amounts owed and showing overdue, then these will also be useful as evidence.

Evidence of chasing debts
Once a payment is overdue you will have hopefully contacted the person or company to chase the debt.

Emails, letters, texts or messages exchanged on social media (Facebook, Twitter etc.) can all be used to help prove a debt is owed and overdue.

If the other party has responded to you apologising or asking for more time, then this admission will be extremely valuable in proving that they don't dispute that they actually owe the debt. So, it's important that you save or screenshot these messages in the event they are needed.

Loaned money without a contract
Without an I.O.U. or a loan agreement in place, proving that money provided to someone was a loan that needs to be repaid can be difficult. This is because often money given to friends, an ex, or family member is considered a gift and so isn't required to be paid back.

Enforcing a verbal agreement that money is owed will hinge around providing evidence to show that the cash was transferred as a loan along with any repayments e.g.

• A bank statement showing a transfer or cheque to the person's bank account
• Repayments received into your account that stopped
• Your account history that large cash gifts are not made to the person on a regular basis
• Evidence of your income, outgoings and savings showing it's unlikely that you could afford to give the amount as a gift

Witnesses to the arrangement
When little or no documentation exists to prove a debt, having an independent witness to a verbal contract can be invaluable.

For example - with a business transaction, did an employee take the order over the phone, deliver goods or perform a service where payment was verbally agreed with the customer? If money was lent to a friend, was another person present to witness the agreement of how/when they were going to pay you back?

But even if an independent witness isn't available, you as a claimant can also present your version of events to the court in a written witness statement. Any witnesses may then need to attend court should the claim go all the way to a hearing.
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Without a written agreement, there should still be plenty of information that you can pull together to prove what you are owed. However, if the other party disputes the amount, or that any debt is owed at all, then you may have a fight on your hands that needs to be settled in court.

It will then be down to the evidence you can gather and how your claim is pleaded to convince a judge that you are entitled to the money owed in the absence of a legally binding written contract. So, obtaining legal advice on the evidence needed for a debt recovery claim and your prospects should be your starting point.
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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?​
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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:

• E-mails, text messages or social media messages discussing the loan or debt
• Bank statements of you initially transferring the money to their account or online payment transfer with reference to it being a 'loan'
• Evidence of repayments being made into your bank account (which then stopped)
• Someone else being present when you agreed to the loan who could be a witness and willing to provide a statement

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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.
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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:​​

• A reasonable time-frame for them to repay in full, this should be seven days as a minimum
• Advising them that if payment isn't forthcoming then you intend to issue county court proceedings
• A summary of the loan including the amount, date started and when it should have been repaid

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.
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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.
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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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With any monetary transaction like a loan to a friend, invoice from a business, or a refund from a tradesperson, there will always be a chance that the other party will fail to pay you.

Just getting back what is owed to you can be difficult enough, but if you then also lose touch with the debtor, the complexity of your problems will increase significantly.

When a business owes you money it's generally a straightforward matter to track them down, as when a business is still trading their contact details can be found online or via their advertising. But for debts owed by a person it can be a much more difficult task to trace an individual.

Regardless of having the debtor's mobile number, email address and social media details, the most important information you will need when considering legal action is their address.​

The first stage in taking formal debt recovery legal action is sending a Letter of Claim (also known as a Letter Before Action) to the debtor.

The purpose of this letter is to outline the exact amount that is owed, the reason you believe the debt is due, provide a reasonable timeframe for payment to be made in full, and in the event payment is not received in this timeframe, warn that court proceedings may be started without further notice.

The Letter of Claim should be posted to the debtor at their current address. While a copy can also be sent via email it must be sent in the post and be clearly dated.  Sending this letter is an important 'pre-action' step and is required to comply with the various pre-court action protocols.

Should the letter not result in payment the next stage is issuing court proceedings. Again, this will require the debtor’s current address for the court to successfully serve the Claim Form and for you to start any subsequent enforcement action.

Therefore, finding the current address of the debtor is critical before considering legal proceedings.
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Businesses are generally easier to locate an address for as most businesses want to be found by their potential customers. A trading address will usually be on their website, used in their advertisements or in any agreements or terms and conditions you may have been given.

​Failing this the next places to try to locate an address are on the various business listings that are available online:

• Companies House – All UK based Limited companies will be registered on the gov.uk Companies House website which will provide their registered and correspondence addresses.
• Online Directories – Local businesses may be featured on popular online directories such as Google Maps, Facebook or Yell.com.
• Trade Organisations – If the business advertises that they are a member of a trade association, then their details should be recorded on the relevant trade body website. For example, plumbers and heating engineers may be on the Gas Safe Register.
• Credit Checking – Many credit score companies that provide credit reports on businesses will also supply their current trading address. Obtaining a financial report will also be very helpful in confirming that the business has the assets available to pay your debt.

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​Individuals can be much more difficult to locate an address for as there will be significantly less information about them online or in the public domain.

A first step is to ask any friends or business associates that you may have in common if they know the debtor's current address. Note that while you may know the workplace of the individual, legal correspondence for a debt owed by them personally must be sent to their residential address and not to their employer.

There are then some free and low cost directories available online which may help trace an individual such as the BT Phonebook and 192.com. However, the results provided by these directories may be limited and outdated so it is not recommended that these are solely relied on.

The most reliable method of tracing an individual's address is to instruct a professional tracing agent. These can be found online and will offer various tracing packages depending on the depth and timeframe required for the search. Also, many tracing agents offer a no trace no fee service which can be helpful in the event an individual cannot currently be located.
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Being owed money but having no address for the debtor adds a further level of complication to taking legal action. However, with a little DIY investigation work and perhaps paying a small fee for some professional tracing assistance, most debtors can be found.

​Once you have located the debtor you then need to be confident that they have the assets or funds available to repay the debt. If you were struggling to locate a business because it has closed, or an individual has moved due to their previous home being repossessed, you will need to think carefully about your chances of recovering the debt before incurring the cost of pursuing them through the courts.
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