It’s important to know how to collect a private debt if you have a habit of loaning money out. Sometimes people will try to take advantage of your kindness. Other times they simply can’t afford to pay the debt. Whatever the case may be, your finances shouldn’t suffer because of someone else. Here are some tips on how to handle your private debt collection.
Prepare Ahead of Time
Knowing how to handle private debt collection means knowing how to set up the debt in the first place. This makes it much easier to get the issue settled with minimal hassle. Some states honor verbal agreements, but they also need to be able to believe the agreement was made in the first place. Instead of relying on someone’s word, create a written agreement. Make sure to have it notarized before anyone signs it. Make two copies so you each have one. Keep yours in a safe place.
In addition to a contract, you might consider a lien. Put a lien on a piece of property in case the person doesn’t pay you. If they don’t pay, you assume possession of the property. In some cases you can even hold the property until the debt is paid.
Sometimes people really just don’t have the money to pay you. Maybe you need the money or maybe you just want to see some effort. If possible, offer to let them make small payments. Just remember what the law says. If you allow someone to make one payment toward a debt, you must continue to accept payments. There is no set minimum on this law either. This means that someone could make $50 payments and then make $5 payments and there is nothing you can do.
You might offer to take a material item in place of the cash. You can also ask for a service. For example, if you loaned money to someone who is handy with carpentry, ask him or her to do some repairs around your house in exchange for the debt. As you see, there are different ways to manage private debt collection.
Take it to Court
The very last step to resort to is to take the problem to the courts. The court that you go through depends on the amount of money owed. In either case you can add the filing fee and court costs to the amount of the debt. You will be required to furnish proof of the debt. If it is found or agreed that the debt is owed to you, they will have to show proof of income and assets. You still may have to take payments and in some cases the hassle isn’t even worth it, but there is a possibility that the debt will be paid in a timely manner.
I hope that you find this post helpful on private debt collection. If you have some tips to share on this topic, feel free to use the comment section 🙂